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Press release from Marketwire

Poseidon Concepts Corp. Announces Strong 2011 Financial and Operating Results, Exceeds 2011 EBITDA Guidance and Reiterates 2012 Guidance

Thursday, March 22, 2012

Poseidon Concepts Corp. Announces Strong 2011 Financial and Operating Results, Exceeds 2011 EBITDA Guidance and Reiterates 2012 Guidance20:23 EDT Thursday, March 22, 2012CALGARY, ALBERTA--(Marketwire - March 22, 2012) -NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWPoseidon Concepts Corp. ("Poseidon" or the "Company") (TSX:PSN) is pleased to announce its first financial and operating results as an independent company, including 2011 EBITDA from continuing operations of $64.6 million, exceeding the Company's most recent upwardly revised guidance of $60 million.Poseidon's complete consolidated financial statements including results from continuing operations, notes thereto, management's discussion and analysis and annual information form for the three months and year ended December 31, 2011 were filed today on SEDAR and are available at www.sedar.com and on the Company's website at www.poseidonconcepts.com.Financial Highlights(in thousands except per share amounts)Three months endedDec. 31, 2011Three months ended Dec. 31, 2010Year endedDec. 31, 2011Year ended Dec. 31, 2010Revenue$33,824$3,891$78,767$5,549EBITDA (1)28,4193,10864,6214,698Per basic share0.410.061.050.09Per diluted share0.410.061.050.09Net income from continuing operations18,7021,94045,0002,721Per basic share0.270.040.730.05Per diluted share0.270.040.730.05Net debt (end of period)$26,600$49,820$26,600$49,820Weighted average shares outstanding- Per basic and diluted69,93253,86061,38453,860(1) EBITDA is calculated as earnings before interest, taxes, depreciation, amortization, and stock-based compensation.Corporate Highlights In the three months and year ended December 31, 2011, Poseidon:Had annual EBITDA from continuing operations of $64.6 million ($1.05 per share) and fourth quarter EBITDA of $28.4 million ($0.41 per share), an increase of 41 percent from the third quarter of 2011; Exceeded its most recent upwardly revised 2011 EBITDA guidance of $60 million, which was issued in November following five other guidance increases over our original guidance of $8.5 million for the first half of 2011; Had revenue of $78.8 million for the year and $33.8 million for the fourth quarter; Had net income from continuing operations of $45.0 million ($0.73 per share) for the year and $18.7 million ($0.27 per share) for the fourth quarter, an increase of 21 percent from the third quarter of 2011; Had year-end net debt of $26.6 million; Initiated paying dividends on December 15, 2011 at the rate of $0.09 per share per month; and Grew its fleet of fracturing fluid handling tanks to 240 systems at year-end.Subsequent to the year ended December 31, 2011, Poseidon:Paid monthly dividends for January, February and March at a rate of $0.09 per share; Conducted a bought-deal financing that closed on February 2, issuing 6.3 million common shares for gross proceeds of $82.5 million; Increased 2012 guidance, including annual EBITDA of $170 million and growth in the tank fleet to 400 units by June 30; Signed new customers to minimum commitment contracts with terms of up to three years and representing combined revenue of $80 million; and Achieved growth in the tank fleet to 325 units by mid-March.MESSAGE TO SHAREHOLDERSIt is a great pleasure to provide the first year-end message to shareholders of Poseidon. The Poseidon management team would like to warmly welcome all shareholders to the Company. It was an eventful 2011 and we have appreciated the support as we launched Poseidon as a pure-play, independent, dividend-paying growth company, while continuing to broaden our service offering and operating presence at oil and natural gas plays across North America. It has been highly satisfying to watch and contribute to Poseidon's success in the field with our growing base of customers.Poseidon launched as an independent Company on November 1, 2011, following the strategic realignment in which we were split from our original parent, a junior Canadian exploration and production (E&P) company based in Calgary, Alberta. (Readers seeking more details on the transaction are referred to our press release of November 1, 2011, as well as the Plan of Arrangement, available under "Financial Reports" in the Investor Centre on our website.) We are proud of our roots in the E&P sector. The whole concept for an innovative new fracturing fluid handling system was a response to a producer's needs. The prototype system was field-tested and proven in the rugged winter conditions of the Alberta Deep Basin.The commercial roll-out on a rental basis to other producers and the rapid growth that followed were driven by customer demand. Customers quickly appreciated the benefits of our large, modular and insulated tanks. The benefits include that our tanks can be quickly deployed over long distances, require only one to two truckloads versus up to 100 for traditional systems, are set up and ready to fill in under one day, are easy to work with, are much cheaper to heat and more efficient in retaining that heat and, ultimately, more cost-effective across the board. Customer demand was generated by these clear benefits and the sector itself was experiencing dramatic increases in the need for efficient and cost-effective fluid handling.In January 2011 - less than 15 months ago - we made the decision to expand into the United States market by entering the Bakken oil play in North Dakota. This strategic move - rare for a Canadian service company barely six months after its commercial launch - proved key to our current and future success. Our service offering received an eager response in North Dakota, and today we are deployed in 16 states and are active in the majority of U.S. unconventional oil and liquids-rich natural gas plays. Currently 80 percent of our tank fleet is deployed in the United States.2011 Financial ResultsThese are Poseidon's first stand-alone financial results, and our financial reporting for the three months and year ended December 31, 2011 includes results from continuing operations, which are after the transfer of the E&P business and assets to a newly formed, independent company. We are very pleased with our growth in revenue, funds from continuing operations, EBITDA and income from continuing operations.We were especially pleased to exceed our most recent upwardly revised EBITDA guidance of $60 million by $4.6 million or eight percent, which was issued in mid- November following five other guidance increases over our original guidance. Fourth- quarter EBITDA of $28.4 million was up by over 40 percent over the third quarter.Our results reflect the growth and high utilization of our fracturing fluid tank fleet, providing a strong foundation to our dividend's sustainability. Poseidon's dividend of $0.09 per share monthly, beginning last December, preceded a trend of increasing yields among Canadian energy services companies over the winter.The 2011 loss from discontinued operations includes a non-cash accounting adjustment related to the transfer of the carrying value on the E&P assets of our former parent company to the new company, and a one-time cash expense relating to reorganization costs. The non-cash adjustment reflects current market conditions as they relate to the E&P assets, driven by low current natural gas prices, and is unrelated to Poseidon's operations. Income from Poseidon's continuing operations was very strong at $45.0 million for its first full year of operations.After assuming debt from the previous entity, Poseidon exited 2011 with net debt of $26.6 million. In early 2012 we conducted a bought-deal equity financing and the $78.4 million in net proceeds have eliminated our debt and provided working capital to fund our near-term tank fleet expansion. We are currently producing about seven tanks per week and the new units are being deployed directly into the field where they immediately start generating revenue.Business and Operating ConditionsPoseidon continued to make excellent progress in the fourth quarter of 2011 and through the opening months of 2012. We are active in the majority of North America's unconventional oil and liquids-rich natural gas plays. Approximately 75 percent of our work is in oil plays, which are continuing to show strong growth, as are natural gas plays offering high liquids content.We have no material exposure to "dry" gas, where activity has slowed considerably. As our natural gas-focused customers seek higher-liquids opportunities, our tanks can be redeployed with minimal disruption, following along with each customer's transition in their focus of activity. This reflects the advantage of the mobility in our products and services - not only the speed of redeployment, but the suitability of our tanks to any type of well where significant fracturing occurs.Poseidon's customer relationships continue to evolve positively. We are now working for the majority of the super-majors and the majority of the top-20 North American independent producers. Most of this work consists of 12-month or longer commitments and is performed under executed master service agreements, an important step in dealing with large customers. These commitments provide revenue visibility and create competitive, first-to-market advantages for Poseidon.In February Poseidon rolled out a new tank model to complement the Triton™, Poseidon™ and Atlantis™ models. The Neptune™ is the smallest designed so far, with capacity of 4,500 barrels (roughly 10 times the size of standard steel tanks). It is serving important market niches, including work based in oil plays involving smaller fractures, as a buffer tank to stage fluids between larger tanks and the wellbore, and as a holding vessel for use on treatment and recycling projects. The Neptune™ is part of Poseidon's continuing effort to broaden and deepen its service offering by, among other things, finding new applications for the existing tank concept.At the other end of the spectrum is the Atlantis™ tank, holding 41,000 barrels. Some of the larger fracturing jobs are using upwards of 150,000 barrels of fluid in a single well, virtually unmanageable for standard tanks. The Atlantis™ has also found a major role for central storage, highly effective for multi-well projects and a much better way of managing fluids, enabling the producer to stockpile when available, then recycle and reuse over successive wells. About 20 percent of the combined fleet is now serving as central storage, another source of longer-term rental revenue.For Poseidon, the increasing environmental concerns over hydraulic fracturing are an opportunity more than a risk. As our customers see it, Poseidon is part of the environmental solution. We are contributing to making fracturing greener, cleaner, safer, and with less ground disturbance. We are enabling more responsible use of water, greater re-use/recycling of fresh water and increased use of low-quality non-potable water.Poseidon is also arguably the number-one replacement for lined pits, the traditional way of servicing the largest fracturing jobs. Lined pits are being prohibited or strongly discouraged by regulators in multiple regions in which Poseidon operates. Numerous U.S. producers are switching away from lined pits or considering doing so, and are making other clear efforts to address overall environmental concerns. Poseidon is central to the solution.SafetySafety is an intrinsic priority to protect our people, other contractors on the well site and the general public. It is also a competitive advantage. As of mid-March 2012 we are approaching 1,500 safely-deployed and successfully executed jobs across North America. This number continues to grow as we are currently averaging 40-50 mobilizations per week. High safety performance and formal safety management systems are often mandatory for gaining a customer, especially among the larger E&P companies.Poseidon has full-time safety managers in both the U.S. and in Canada, who oversee safety and operational training provided to all new employees. The Company is in the process of gaining its Alberta Certificate of Recognition, the key regulatory document certifying that a company has a recognized safety management system in place.Maintaining a reputation for excellent execution and safety are key. This priority has influenced our decision to grow at a measured pace that enables us to recruit, train and integrate high-quality new employees and ensure that our high standards are maintained. This is the best approach for our employees and customers, and is also good business.OutlookOperationsWe foresee an active and successful year of growth ahead and we are continuing to build to meet demand. We continue to use our first-mover advantage to remain ahead of potential and future competitors, both by increasing our penetration of core markets and by evolving new applications, new markets and potential complementary new products and services. We are devoting time and creative energy to evaluating ways to expand our breadth with customers and will update shareholders on new developments as these efforts unfold.Poseidon's tank utilization has remained at robust levels and day rate pricing has been stable despite current natural gas prices. Crude oil prices are extremely strong and producers have ample opportunity to increase activities in unconventional oil plays, many of which remain in their early stages. Higher-liquids gas plays also continue to be profitable and producers are committing capital to horizontal drilling of numerous opportunities. Any rebound in the gas price would likely spur increased industry activity and drive even greater market demand for Poseidon's services, given that multi-zone vertical and horizontal gas wells have large fluid requirements and tend to be fractured using water.Market AssessmentNotwithstanding growth to date, Poseidon is serving only a small proportion of the overall fracturing fluid handling market. We have a number of large new customers in the "adoption" phase, in which a small number of tanks are used on a limited number of jobs. Some of these customers have significant numbers of drilling rigs under contract, creating large scope for growth as they decide to integrate Poseidon tanks into entire regional operations and potentially additional regions.As our core market continues to drive Poseidon's organic growth, the market itself is growing and evolving. The number of horizontal wells drilled across North America, the average length of lateral legs and the average number of fractures per well all continue to increase. We started out providing fluid handling for day-to-day fracturing jobs. Since then we have experienced increased usage for flowback storage, storage of produced water and central storage on treatment and recycling projects. Our addressable market keeps getting larger as we creatively find further uses for our products and as producers often themselves think of new ways of using our tanks. Our longer-term goal is to be more than a dividend-paying company, but a dividend growth story with financial and operational sustainability.Guidance Poseidon reiterates its 2012 guidance which was issued on January 11, 2012:$170 million EBITDA (an upward revision from the $130 million forecast issued in September 2011); $60 million capital expenditures; and Growth in the tank fleet to 400 units by June 30.Poseidon's 2012 priorities are to:Ensure the sustainability of its monthly dividend of $0.09 per share; Continue growing the fleet and increasing market penetration; Allocate appropriate resources to designing, testing and evaluating potential new product developments; and Continue to achieve industry-leading field execution and safety.Customer demand remains strong and the tank build is ahead of schedule at 325 units to mid-March. To date in the first quarter we have signed new minimum commitment contracts with terms of up to three years and representing combined revenue of $80 million. We look forward to updating shareholders on our first quarter 2012 results in early May, which we expect to be another record-setting quarterly performance for Poseidon.Dividend DeclarationPoseidon is also pleased to announce that its Board of Directors has declared the following dividends, payable to shareholders of record as of the close of business on the record dates indicated below. Dividend amount per common shareEx-dividend dateRecord datePayment date (1)$0.09April 26, 2012April 30, 2012May 15, 2012$0.09May 29, 2012May 31, 2012June 15, 2012$0.09June 27, 2012June 29, 2012July 16, 2012(1) Dividends are at the discretion of the Board of Directors and subject to change. Dividends paid by Poseidon to Canadian residents are eligible dividends for Canadian income tax purposes.POSEIDON CONCEPTS CORP. IS A PUBLICLY TRADED CANADIAN ENERGY EQUIPMENT AND SERVICES COMPANY THAT PROVIDES AN INNOVATIVE FLUID HANDLING SYSTEM TO THE OIL AND NATURAL GAS INDUSTRY ACROSS NORTH AMERICA. POSEIDON HAS APPROXIMATELY 81.2 MILLION COMMON SHARES ISSUED AND OUTSTANDING, WHICH TRADE ON THE TSX UNDER THE SYMBOL "PSN". FURTHER INFORMATION ON POSEIDON'S BUSINESS AND OPERATIONS CAN BE FOUND ON POSEIDON'S WEBSITE ( www.poseidonconcepts.com) .Reader AdvisoryCertain statements contained in this news release constitute forward-looking statements and forward looking information (collectively, "forward-looking statements") within the meaning of applicable Canadian securities laws. Such forward-looking statements relate to future events or the Company's future performance. All statements other than statements of historical fact contained in this news release may be forward-looking statements. Such statements and information may be identified by words such as "approximately", "will", "intend", "anticipate", "could", "should", "may", "might", "expect", "estimate", "forecast", "plan", "potential", "project", "assume", "contemplate", "believe", "budget", "shall", "continues", "milestone", "target", "vision", "looking forward to" and similar terms or the negative thereof or other comparable terminology. The forward-looking statements contained in this news release involve known and unknown risks, uncertainties and other factors that are beyond the Company's control, which may cause actual results or events to differ materially from those anticipated in such forward-looking statements.Forward-looking statements are based on the estimates and opinions of the management of Poseidon at the time the statements were made. In addition, forward-looking information may include statements attributable to third party industry sources. There can be no assurance that the plans, intentions or expectations upon which such forward-looking statements are based will occur. Management of Poseidon believes the expectations reflected in these forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. The forward-looking statements represent the views of management of Poseidon only as of the date of this news release and should not be relied upon as representing management's views as of any date subsequent to the date of this document.This news release contains forward-looking statements pertaining to the following: the Company's growth strategy and related milestones and schedules; the Company's ability to maintain its competitive position; the Company's forecast operating and financial results; the Company's planned capital expenditures; the Company's ability to fund debt maturities; the timing and payment of dividends; suggestions of future outcomes; the Company's growth strategy and related milestones and schedules; forecast operating and financial results; projected increases of shareholder value; and the future use and development of technology.With respect to forward-looking statements contained in this news release, the Company has made a number of assumptions. The key assumptions underlying the aforementioned forward-looking statements, include but are not limited to: the assumptions inherent in the Company's current guidance, including utilization rates for tank systems and foreign exchange and interest rates; the Company's projected capital expenditures; the Company's projected capital investment levels; the flexibility of the Company's current capital spending plans and the associated sources of funding; the Company's ability to generate sufficient cash flow from operations to meet its current and future obligations; the Company's expectations of the demand for tank systems and the general activity of the oil and natural gas industry; the ability of the tank system manufacturers to source raw materials; the Company's ability to renew its credit facilities on acceptable terms; the current tax and regulatory regime remaining substantially unchanged; the Company's ability to continue to pay dividends; the continued demand for the Company's tank systems and the ability to meet client expectations and demands; the availability of sufficient transportation options for the deployment of the Company's tank systems; the continued ability of Poseidon to safely deploy its tanks and maintain its safety records; the ability of Poseidon to find and retain qualified personnel; and the ability of Poseidon to continue to penetrate the market for its tanks. Certain or all of the foregoing assumptions may prove to be incorrect.The Company's actual results could differ materially from those anticipated in the forward-looking statements as a result of substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation: dependence on manufacturers of the tank systems; operating risk liability; credit facility risk; demand for Poseidon's tank systems; levels of competition in the fracturing fluid storage industry; the Company's limited operating history in the fracturing fluid storage industry; the Company's ability to attract and retain clientele; delays resulting from or inability to obtain required regulatory approvals; the impact of general economic conditions in Canada, the United States and globally; industry conditions; the Company's ability to maintain or increase its market share; the Company's ability to develop new or complementary product lines; changes in laws and regulations (including the adoption of new environmental laws and regulations in Canada or the United States) and changes in how they are interpreted and enforced; obtaining required approvals of regulatory authorities in Canada or the United States; increased competition; a lack of qualified personnel or management; fluctuations in foreign exchange or interest rates; and stock market volatility. Readers are cautioned that the foregoing lists of factors and risks are not exhaustive and reference is made to the items under "Risk Factors" in the Company's Annual Information Form ("AIF") for the year ended December 31, 2010, the 2012 prospectus, and other documents filed on SEDAR and available for review at www.sedar.com. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this news release are made as at the date hereof and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.This news release contains the term EBITDA which is defined as earnings before interest, taxes, depreciation and amortization. EBITDA as presented does not have any standardized meaning prescribed by international financial reporting standards (IFRS) and therefore it may not be comparable with the calculation of similar measures for other entities. Management uses EBITDA to analyze the operating performance of the business. EBITDA as presented is not intended to represent cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.FOR FURTHER INFORMATION PLEASE CONTACT: Lyle D. MichalukPoseidon Concepts Corp.Chief Executive Officer403-262-9280ORMatt C. MacKenziePoseidon Concepts Corp.Chief Financial Officer403-206-6107www.poseidonconcepts.com