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Third Quarter Report - Continued Growth In Industrial Safety Tempered By Declining Market Demand For Oilfield Services

NEWS RELEASE - November 14,, 2007

HSE Integrated Ltd. (“HSE”, “Our”, “We”, or the “Company”) announced its third quarter financial results for the quarter and nine months ended September 30, 2007. Financial and operating highlights are summarized below:

  • Revenue was $23.6 million in the quarter (YTD – $70.9 million), which represented a reduction of 12.5% (YTD – 4.7%) compared to the same periods in the prior year.
  • The success of the Company’s revenue diversification strategy continues to be demonstrated as significant declines in revenues from conventional Oilfield activity were largely offset by growth in Industrial and Environment revenues on a year to date basis.
  • Revenues from Industrial markets (non-conventional upstream oil and gas, plants, facilities, training, and safety management services) increased by 91%, growing to $11.4 million in the quarter as compared to $6 million for the same period in the prior year.
  • Industrial safety services revenue as a percentage of the total business mix in the quarter more than doubled – 49% in 2007 compared to 22% in the previous year.
  • Customer demand continues to increase for the Company’s air quality monitoring or “Environment” market, which rose 21% in the quarter.
  • During the quarter, the Company acquired Prairie Wide Safety Ltd, which expanded the national delivery footprint for the Company’s full suite of services into the established and active hydrocarbon producing region of southeast Saskatchewan.
  • EBITDA was $1.4 million for the quarter (2006 - $4.3 million) as the redeployment of personnel to Industrial safety services only partially offset a 50% decline in generally higher margin Oilfield services revenue.
  • As part of the continual focus on increased efficiency and higher profit margins, the Company has implemented an initiative for cost reductions of over $3 million on an annualized basis, the bulk of which is to be in 2008 and beyond. This initiative includes field service facility consolidation and a reduction in equipment and personnel not essential for service delivery.
  • Equipment redeployment continues as the Company relocates safety equipment surplus to current demand in the Oilfield sector in Alberta to expanding field service operations in British Columbia, Saskatchewan, Ontario, New Brunswick, Nova Scotia and Michigan.
  • Although HSE is only partially exposed to the Oilfield market and has the ability to re-deploy resources to other industries, a significant decline in market capitalization value precipitated a $15 million non-cash goodwill impairment charge for the quarter.
  • As at September 30, 2007, the Company was in compliance with its financial covenants under its credit facilities.

David Yager, Chairman and CEO, offered the following comments for HSE’s third quarter financial results.

“Demand for services for conventional oil and gas activity remained soft in the third quarter requiring HSE to continue to adjust its business model and organization. HSE’s diversification into new industries and geographic regions continues to be very successful and has given HSE a platform for continued growth even if natural gas prices and drilling activity levels do not improve.

This year’s significant downturn in the oilpatch has freed up manpower and equipment for redeployment into other markets and industries. Job quality continues to improve as HSE’s significant investments in a unique integrated services package, new equipment, worker training and outstanding technical support become apparent to our customers.

HSE has permanently changed its business model in 2007, transforming from a large oilfield safety company to Canada’s first national industry safety company. Our marketing and technical staff has risen to the challenge this year and is proving every day that the market for the Company’s services is larger than previously thought, even in Alberta.

Continually rising Industrial revenues prove HSE’s business model is sound and valuable. Attractive growth opportunities in new markets and industries, combined with ongoing examinations and adjustments of fixed costs and operating processes, give us confidence that the major adjustments of 2007 will provide the foundation for a return to overall growth in 2008 and beyond.

I encourage investors to take the time to better understand HSE’s business model, its strategies and ongoing growth opportunities.”

For further information and analysis please see the attached Management’s Discussion and Analysis and Financial Statements.

CONFERENCE CALL

HSE will be hosting a conference to discuss their results at 11 AM (Eastern Standard Time), 9 AM (Mountain Standard Time) on Wednesday November 14, 2007. To participate call 1-866-250-4909 or 1-416-646-3095. Details on the webcast and conference call replay are contained in a separate previous News Release.

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: