Essential Energy Services Ltd. (TSX:ESN) ("Essential" or the
"Company") announces a 2013 capital spending budget of $45 million
comprised of $18 million of newly announced growth capital, $14
million to complete previously announced growth capital projects
and $13 million of maintenance capital. Spending is primarily
focused on the high demand deep coil tubing fleet and further
developing Essential's service rig fleet. This spending is expected
to be funded from operating cash flow and the existing credit
facility. Essential will monitor industry conditions in 2013 and
may adjust the capital program if appropriate.
Essential expects 2012 capital spending to be approximately $50
million. In mid-December, Essential took delivery of its most
recent conventional deep coil tubing rig and expects commissioning
to be completed prior to December 31. This brings Essential's deep
coil tubing fleet to 27, which is Canada's largest deep coil tubing
well service fleet.
In December 2012, Essential put its first coil tubing reel
trailer into service. The reel trailer is a stand-alone unit that
carries the coil tubing reel and works alongside a deep coil tubing
rig. Distributing the weight between the coil tubing rig, which can
travel with or without the coil tubing reel, and the reel trailer
provides greater versatility for transportation. The reel trailer
can carry up to 6,000 meters of two and seven-eighths inch diameter
coil. The addition of large diameter coil depth capacity using this
reel trailer expands the work capability of a coil tubing rig up to
the limits of its injector. Successful design and implementation of
the innovative technology required for this large capacity reel
trailer is a critical step as Essential designs and builds the next
generation of deeper, masted mobile coil tubing rigs.
Effective January 1, 2013 Essential will be rebranding its
entire fleet of coil tubing rigs and supporting fluid and nitrogen
pumpers to "Essential Coil Well Service". At this time, the
Technicoil brand will no longer be used for Essential's
operations.
At December 19, 2012, long-term debt outstanding was $32
million.
2013 Growth Capital Spending
The $32 million of growth spending is expected to consist of the
following:
New growth spending ($18 million):
-- Coil Well Service: one masted deep coil tubing rig and one nitrogen
pumper.
-- Service Rigs: three mobile free standing, all-period double service
rigs.
-- Other ancillary equipment.
Completion of previously announced projects ($14 million):
-- Coil Well Service: completion of five masted deep coil tubing rigs, the
conversion of one intermediate coil tubing rig to a deep coil tubing rig
and one nitrogen pumper.
-- Service Rigs: completion of two mobile free standing, all-period double
service rigs.
Three of the five previously announced masted deep coil tubing
rigs were expected to be constructed by a fabrication company that
is having significant issues meeting delivery deadlines. This has
already caused delivery delays of approximately 10 months. One of
the rigs is approximately 50% complete and at this point, Essential
hopes to take delivery of this rig in the third quarter of 2013.
Meaningful assembly of the other two rigs has not begun so timing
of delivery of these rigs is difficult to assess. Fortunately,
Essential is using a number of different fabricators for its growth
program and only has three rigs impacted by this fabricator's
delays.
Equipment Count
Essential anticipates the following equipment count after
completion of the 2013 capital spending budget:
Forecast Budgeted Timing of Forecast
December 31/12 Additions Additions December 31/13
------------------------------------------------------
Coil tubing-deep (i) 27 5 Q1, Q3(2),Q4(2) 32
Coil tubing-other (ii) 21 (1) Q1 20
------------------------ --------------
Coil tubing-total 48 4 52
Nitrogen pumpers 15 2 Q1, Q4 17
Fluid pumpers 18 0 18
Service rigs 57 5 Q1(2), Q2, Q3(2) 62
(i) Equipment count excludes the two deep masted coil tubing rigs with
uncertain delivery dates.
(ii)Conversion of an intermediate depth coil tubing rig to a deep coil
tubing rig.
ABOUT ESSENTIAL
Essential is a growth-oriented, dividend paying corporation that
provides oilfield services to producers in western Canada for
producing wells and new drilling activity. Essential operates the
largest coil tubing well service fleet in Canada with 48 coil
tubing rigs and a fleet of 57 service rigs. Essential also sells,
rents and services downhole tools and equipment including the
Tryton Multi-Stage Fracturing System. Further information can be
found at www.essentialenergy.ca.
READER ADVISORY
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws. The use of any of the words "expect",
"anticipate", "continue", "estimate", "objective", "ongoing",
"may", "will", "project", "should", "believe", "plans", "intends"
and similar expressions are intended to identify forward-looking
information or statements. In particular, this news release
contains forward-looking statements including expectations
regarding current year capital spending, future capital spending,
in-service dates of new equipment, delivery delays of certain of
the masted coil tubing rigs, possible future adjustments to the
budget and plans to fund the capital spending with operating cash
flow and the credit facility.
Although the Company believes that the expectations and
assumptions on which such forward-looking statements and
information are reasonable, undue reliance should not be placed on
the forward-looking statements and information because the Company
can give no assurance that such statements and information will
prove to be correct. Since forward-looking statements and
information address future events and conditions, by their very
nature they involve inherent risks and uncertainties.
Actual results could differ materially from those currently
anticipated due to a number of factors and risks. These include,
but are not limited to: the risks associated with the oilfield
services sector (e.g. demand, pricing and terms for oilfield
services; current and expected oil and natural gas prices;
exploration and development costs and delays; reserves discovery
and decline rates; pipeline and transportation capacity; weather,
health, safety and environmental risks); integration of
acquisitions, competition, and uncertainties resulting from
potential delays or changes in plans with respect to acquisitions,
development projects or capital expenditures and changes in
legislation, including but not limited to tax laws, royalties,
incentive programs and environmental regulations; stock market
volatility and the inability to access sufficient capital from
external and internal sources; the ability of the Company's
subsidiaries to enforce legal rights in foreign jurisdictions;
general economic, market or business conditions; global economic
events; changes to Essential's financial position and cash flow;
the availability of qualified personnel, management or other key
inputs; currency exchange fluctuations; changes in political and
security stability; risks associated with government regulations
and environmental health and safety matters and other unforeseen
conditions which could impact the use of equipment and services
supplied by Essential in Colombia; and other unforeseen conditions
which could impact the use of services supplied by the Company.
Accordingly, readers should not place undue reliance on the
forward-looking statements. Readers are cautioned that the
foregoing list of factors is not exhaustive.
Additional information on these and other factors that could
affect the Company's financial results are included in reports on
file with applicable securities regulatory authorities and may be
accessed through the SEDAR website (www.sedar.com) for the Company.
The forward-looking statements and information contained in this
news release are made as of the date hereof and the Company
undertakes no obligation to update publicly or revise any
forward-looking statements or information, whether as a result of
new information, future events or otherwise, unless so required by
applicable securities laws.
The TSX has neither approved nor disapproved the contents of
this press release.
Contacts: Essential Energy Services Ltd. Garnet K. Amundson
President and CEO (403) 513-7272service@essentialenergy.ca
Essential Energy Services Ltd. Jeff B. Newman Chief Financial
Officer (403) 513-7272service@essentialenergy.ca Essential Energy
Services Ltd. Karen Perasalo Investor Relations (403)
513-7272service@essentialenergy.ca
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