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Press release from Marketwire

Poseidon Concepts Corp. Announces Strong First Quarter Financial and Operating Results and Increases 2012 Guidance

Wednesday, May 09, 2012

Poseidon Concepts Corp. Announces Strong First Quarter Financial and Operating Results and Increases 2012 Guidance20:21 EDT Wednesday, May 09, 2012CALGARY, ALBERTA--(Marketwire - May 9, 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 record quarterly revenue and EBITDA driven by continued growth in customer demand during the three months ended March 31, 2012. The Company is also pleased to provide an operational update and to announce an increase in forecast 2012 EBITDA and tank fleet growth.Based on continued robust spot-market demand and a steady pipeline of long-term contracts, the Company plans to increase the tank fleet to 500 units by September 30, 2012, compared to 400 units previously forecast for June 30, 2012. Earnings before interest, taxes, depreciation and amortization (EBITDA) are now estimated at $210 million for 2012, compared to $170 million under previous guidance and $130 million under original guidance. The 2012 capital budget remains at $60 million."We continue to foresee an active and successful year of growth in our core business and are continuing to build to meet demand," said Lyle Michaluk, Poseidon's Chief Executive Officer. "In addition, new product development remains a high priority, with time and resources being devoted to this initiative."Poseidon's interim consolidated financial statements and notes thereto, as well as the related management's discussion and analysis for the three months ended March 31, 2012, were filed today on SEDAR and are available at www.sedar.com and on the Company's website at www.poseidonconcepts.com.Financial HighlightsThree months ended Three months ended(in thousands except per share amounts)March 31, 2012March 31, 2011Revenue$52,129$11,327EBITDA (1)43,703 8,838Per basic share0.55 0.16Per diluted share0.55 0.16Net income from continuing operations29,639 6,281Per basic share0.38 0.11Per diluted share0.37 0.11Net working capital surplus (debt) (end of period)$54,575$(50,760)Weighted average shares outstandingBasic78,836 54,637Diluted79,770 55,912(1)EBITDA is calculated as earnings before interest, taxes, depreciation, amortization, and stock-based compensation.Corporate HighlightsIn the three months ended March 31, 2012, Poseidon:Had EBITDA of $43.7 million ($0.55 per diluted share), an increase of 394 percent from the first quarter of 2011 and 54 percent from the fourth quarter of 2011; Had net income of $29.6 million ($0.37 per diluted share), an increase of 372 percent from the first quarter of 2011 and 50 percent from the fourth quarter of 2011; Had revenue of $52.1 million, an increase of 360 percent from the first quarter of 2011 and 54 percent from the fourth quarter of 2011; Conducted a bought-deal equity financing that closed on February 2, issuing 6.3 million common shares for gross proceeds of $82.5 million; Paid monthly dividends for January, February and March at a rate of $0.09 per share; Achieved growth in the tank fleet to 340 units by the end of March; and Exited the first quarter with zero net debt and a working capital surplus of $54.6 million. Subsequent to the end of the quarter, Poseidon:Paid a monthly dividend for April at a rate of $0.09 per share; Increased 2012 guidance, as discussed below; and Initiated the renewal of minimum commitment contracts first signed one year earlier, under similar terms and pricing, and continued to sign new minimum commitment contracts with several large independent and major producers. MESSAGE TO SHAREHOLDERSWe are pleased to report another highly successful quarter for Poseidon as the Company extended its track record of meeting its customers' needs for fluid handling solutions, growing its tank fleet and expanding into new geographical areas while increasing penetration of existing markets. Poseidon's monthly dividend of $0.09 per share continued to be paid to shareholders in each of January, February and March, and the dividends of $0.09 per share for the next three months were announced subsequent to the end of the quarter. Quarterly financial results exceeded our internal forecasts and, combined with a continued positive outlook, provided the confidence to increase 2012 guidance.During and subsequent to the quarter, large customers continued to integrate their use of the Poseidon fluid handling system and we began negotiating successful renewals of the initial one-year contracts signed in 2011. The Company also advanced organizational development. We added key personnel, increased information technology capabilities to handle a rapidly growing volume of business and began to apply the Poseidon system outside our core energy industry market. Most importantly, our team worked diligently on developing new products aimed at realizing our vision of being a vertically integrated provider of fluid management solutions. First Quarter 2012 Financial ResultsIn the three months ended March 31, 2012, the Company continued to deliver growth in revenue, funds from operations, EBITDA and net income, setting new quarterly records in all four categories. First-quarter EBITDA of $43.7 million was up by 54 percent over the fourth quarter of 2011 and by 394 percent over the first quarter of 2011. These record results reflect the growth and robust utilization of Poseidon's fracturing fluid tank fleet.In the first quarter Poseidon closed a bought-deal equity financing for net proceeds of $78.4 million which eliminated the Company's debt and provided working capital for the accelerated capital program of approximately seven new tanks per week. Poseidon exited the first quarter with a strong working capital position to continue funding the tank fleet's expansion and other corporate initiatives for the foreseeable future. Business and Operating Conditions We passed another operational milestone in the first quarter with the safe and successful deployment of our 1,500th job. Mid-way through the second quarter, we are approaching 2,000 safely executed jobs across North America. Poseidon is quickly gaining a customer reputation for excellent execution and safety, and we believe we are establishing a brand built on customer satisfaction, cost-effectiveness, innovation and integrity. We often mention the ongoing goal of levering our first-mover advantage, and this strengthening brand image is among the positive results.Poseidon is active in the large majority of North America's unconventional oil and liquids-rich natural gas plays. Activity in Western Canada continues to grow although this market is characterized more by stability than rapid expansion. Growth in the United States remains dramatic and features a combination of increased penetration in existing plays and entry into adjoining plays as well as new regions. We are now working in 17 U.S. states, with recent growth in the southern states being particularly strong. During this period we have added some large, high-quality customers who are generating repeat business and can account for up to 10 percent of the tank fleet rented at a time. Central storage continues to have a significant impact on our business, with several large customers recently adding central storage as a key component of their fluid management.On a commodity basis, approximately 80 percent of Poseidon's work is in oil plays, reflecting the energy sector's commodity price-driven focus and the advantage of our products in mobility and suitability to any type of well where significant fracturing operations are required. In the first quarter we rolled out the Neptune™ model, our smallest tank to date with capacity of 4,500 barrels. It is serving important market niches, including oil plays involving smaller fractures, as a buffer tank to stage fluids between larger tanks, and as a holding vessel on treatment and recycling projects. In early April we introduced our fifth tank model, the Odyssey™. Its capacity of 26,500 barrels provides an upper-mid-sized option between the original Poseidon model and our largest model, the Atlantis, and there are already multiple Odyssey tanks deployed in various unconventional plays. The roll-out reflects Poseidon's practice of listening to our customers' needs and broadening our service offering accordingly.Despite decade-low natural gas prices, in the last several months we have seen demand growth in various natural gas plays. Although this seems paradoxical, it demonstrates that Poseidon is a new alternative to an existing service requirement and there is ample growth opportunity even in a cyclically declining market. The improved efficiencies and lower costs offered by Poseidon provide further incentive for cost-conscious gas producers to utilize our product and also positions us to lever off a future rebound in natural gas prices.Market AssessmentThe Poseidon approach continues to prove itself as an operationally, economically, and environmentally efficient alternative to traditional fluid storage and handling methods. We continue to use our first-mover advantage to remain ahead of potential competitors, with our service-first culture, leading HS&E standards, multi-basin critical mass and safety track record. These strengths are clearly resonating with our large and growing customer base.We're frequently asked about the threat to our business posed by competition. The most important thing for our shareholders to remember is that Poseidon is the new, competitive alternative to traditional methods that work but are challenged in this new era of increased environmental scrutiny and fracturing service intensity. Lined pits, for example, historically used for the largest fracturing jobs, have many environmental and operational drawbacks, and are increasingly frowned upon by regulators. The Poseidon approach is increasingly displacing lined pits. Poseidon is also a competitive substitute to the thousands of 400 and 500-barrel steel tanks that have been in service throughout North America for several decades. The Poseidon system is very cost-competitive and has many operational advantages including a smaller carbon footprint, vastly more efficient transport, faster setup and superior heat retention. There is also a fragmented assortment of other above-ground storage alternatives, which in our estimation make up less than five percent of the current fracturing fluid storage market. Important to note is that, to the extent that they provide advantages over traditional storage methods, they primarily represent competition to those higher-cost or less efficient systems. The combined market penetration of all the alternative systems, Poseidon included, is still only a fraction of the overall market potential.Poseidon continues to offer significant savings over the traditional steel tanks and an environmentally-friendly alternative to lined pits. We continue to see robust demand for our products and services. With or without competition, we believe that our business model is sustainable over the longer-term thanks to the inherent advantages over the incumbent methods and the fact that being a rental business with relatively low fixed costs and basic physical infrastructure requirements can help us maintain a high level of free cash flow. Among Poseidon's multiple competitive advantages are having a soundly-designed and patented modular tank combined with a premium service offering that fulfills the needs of quality and safety-conscious customers.Our rental pricing has remained steady despite current natural gas prices as producers look to us as a cost-effective solution. We have also recently come through our first round of annual minimum commitment contract renewals. We have been very pleased to see satisfied customers renewing at similar terms to last year and, frequently, with a larger number of tanks committed. We are continuing to work on developing additional long-term relationships, focusing especially on locking-in one year or longer commitments under master service agreements. Organizational and New Product DevelopmentAs the emerging leader in providing fluid storage solutions across multiple plays to North America's largest energy producers, Poseidon continues to bolster its technical team so that it can continue to provide its customers with industry-leading expertise in fluid storage, handling and logistics. With that, Poseidon is happy to announce the appointment of Angus Jenkins as Vice President, Operations. A professional engineer, Mr. Jenkins has experience in well completions and project management and will focus Poseidon's operations team on providing technical answers to our customers seeking complete fluid handling solutions, including central storage systems with ancillary services.We are also pleased to announce the promotion of Joe Kostelecky, currently Senior Vice President, United States Operations, to Executive Vice President. Mr. Kostelecky has been instrumental in Poseidon's dramatic penetration of multiple producing basins across the U.S. His new title reflects this profound contribution and his role as a key member of Poseidon's executive leadership team, as well as an expanded role that will include leading the expansion of Poseidon's business development efforts in all addressable markets. We are also continuing to develop new products and services that lever our market presence and provide value-added functionality to our customers, who are expressing their needs as they relate to the E&P fluid cycle. Our goal is to develop new products that are innovative, add value, fall within the fluid handling space, create vertical integration for Poseidon and increase our customers' operating efficiency. For competitive reasons we are not providing further details, but will update the market as these new products and services become material.Further, we are conducting initial fluid handling operations in new scenarios outside our core North American oil and natural gas business. These activities are beginning to generate revenue and EBITDA. For the same competitive reasons, we will update the markets when our presence is more firmly established. We continue to dedicate technical and business development resources to both programs, which we see as holding long-term promise.OutlookPoseidon has a positive outlook for the remainder of 2012. To date in the second quarter we are busier in Canada than in the second quarter of 2011, suggesting a shorter spring break-up and reflecting business from customers that are able to work through spring break-up. The major growth opportunity clearly continues to be the United States, which is our primary business development focus. Several major new customers have been secured in the last few months, with the full potential revenue impact to be felt in the following quarters.The Company's priorities for the second half of 2012 are to:Continue fleet expansion to meet customer demand, maintaining a build rate of approximately seven tanks per week; Advance new product development to the operational and commercial stages, with a priority on deployment to strategic key customers; Continue the initial steps in introducing the Poseidon fluid-handling solution to scenarios other than oil and natural gas well completions and assess the market potential of these new areas and applications; and Following capital allocation to fleet expansion and new product development, assess Poseidon's ability to achieve its longer-term goal to be a dividend growth company. GuidanceWith construction outpacing previous assumptions, driven by continuing growth in demand, Poseidon increases its 2012 guidance to:EBITDA of $210 million, an upward revision from the $170 million forecast in January 2012 and from original guidance of $130 million in September 2011; and Growth in the tank fleet to 500 units by September 30, 2012. Visibility for industry activity, customer demand, fleet size and revenue in the core well completions tank rental business is good through year-end 2012. While we have not articulated growth plans for the fourth quarter of 2012, Poseidon expects a continued strong pace of expansion in the tank fleet due to further geographical diversification, market penetration and customer integration. In addition, the Company continues to formulate capital plans around its new product development and other forms of expansion. Accordingly, the Company expects to provide a refined forecast incorporating anticipated fourth-quarter 2012 activity levels at a later date. 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 81.1 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 Advisory This news release contains certain forward-looking statements and other information (collectively "forward-looking information") about our current expectations, estimates and projections. Forward-looking information in this news release is identified by words such as "anticipate", "believe", "expect", "plan", "forecast", "target", "could", "focus", "vision", "goal", "proposed", "scheduled", "milestone", "outlook", "potential", "may", "looking forward to", or similar expressions and includes suggestions of future outcomes, including statements about our growth strategy and related milestones and schedules, forecast operating and financial results, planned capital expenditures, future dividends, future use and development of technology and projected increasing shareholder value. Readers are cautioned not to place undue reliance on forward-looking information as our actual results may differ materially from those expressed or implied in the forward-looking statements. Developing forward-looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to Poseidon and others that apply to the industry generally. The factors or assumptions on which the forward-looking information is based include without limitation: assumptions inherent in our current guidance, including foreign exchange and interest rates; our projected capital investment levels; the flexibility of capital spending plans and the associated source of funding; our ability to generate sufficient cash flow from operations to meet our current and future obligations; our expectations of the demand for tank systems and the general activity of the oil and gas industry; and other risks and uncertainties described from time to time in the filings we make with securities regulatory authorities.Actual results could differ materially from those currently anticipated due to a number of factors, risks and uncertainties. Such risks and uncertainties include, without limitation, risks associated with dependence on manufacturers of the Poseidon tank systems; operating risk liability; demand for Poseidon's tank systems; levels of competition in the fracturing fluid storage industry; the ability of Poseidon to attract and retain clientele; the ability of Poseidon to fund its ongoing capital requirements; 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; changes in laws and regulations (including the adoption of new environmental laws and regulations) and changes in how they are interpreted and enforced; increased competition; the lack of availability of qualified personnel or management; fluctuations in foreign exchange or interest rates; and stock market volatility. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributed to Poseidon or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Additional information on the foregoing risks and other factors that could affect Poseidon's operations and financial results are on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Poseidon 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