Mr. Heckmann continued, “As expected, the industry related to our shale business slowed in the second half of 2012, particularly during the fourth quarter. Activity declines exceeded normal seasonal factors, which we believe was a function of drilling efficiencies pulling our customers’ capital expenditures forward in the year. Working closely with our customers, we planned for this pullback and reduced our capital expenditures, which totaled $11.8 million for the second half of the year, and in turn were able to grow our cash position in both the third and fourth quarters.”
“Despite anticipated challenges in the second half of the year, the Power Fuels business outperformed our expectations,” said Mark D. Johnsrud, Chief Executive Officer and Vice Chairman of Heckmann Corporation. “The proxy statement filed on October 9, 2012 included projections for second half 2012 revenues of $180.1 million and EBITDA of $57.8 million. Unaudited financial results for the second half of 2012 for the Power Fuels business were revenues of $173.2 million and EBITDA of $62.3 million.”
Jay C. Parkinson, Executive Vice President and Chief Financial Officer of Heckmann, commented, “The quarter was impacted by a number of non-recurring and one-time items. During a transitional quarter and despite general activity slowdowns and one month of contribution from Power Fuels, our fourth quarter results reflected Adjusted EBITDA in excess of our capital expenditures, and we continued to grow our cash position during the quarter. We have hit an inflection point on capital expenditures – we have invested to build our network, and are now at the point where we can begin to leverage that investment, so our capital expenditures should be much lower going forward. Our liquidity position is strong with over $16.2 million in cash on hand and over $177.0 million available under our revolver.”
Fluids Management Division (includes Heckmann Water Resources (“HWR”) & December financial results for Power Fuels)
During the fourth quarter, revenues for the Fluids Management Division grew to $83.7 million, which includes December’s financial results from the Power Fuels merger.
In the Bakken Shale area, overall activity levels were down in the fourth quarter, although at levels not as significant as management originally estimated. Despite the slowdown in activity, overall pricing and utilization levels in the fourth quarter were better than management’s expectations. As production increases, operators continue to look for efficiencies. To meet customer requirements, the Company is expanding its operations and hiring additional personnel.
In the Haynesville Shale area, to offset continued weakness in natural gas pricing, the Company reduced costs and is focused on increasing margin by adding fluid delivery work to complement fluid collection and disposal. Pipeline volumes in the fourth quarter were down approximately 8% sequentially, primarily as a result of curtailed production due to the price of natural gas.
In the Marcellus and Utica Shale areas, revenue expectations were exceeded due to activity with two large customers. The Company continues to expand operations in the Marcellus and Utica Shale areas, and continues to hire drivers and plans to add an additional fluid disposal facility in the area to satisfy 2013 demand.
In the Eagle Ford Shale area, delivery and collection activity increased sequentially, as the Company began work for a large customer. Results were impacted by incremental costs incurred to hire and train new drivers in anticipation of 2013 growth.
Recycling Division (includes Thermo Fluids business)
Revenues for the fourth quarter decreased approximately 1.2% relative to the same period in 2011. Reprocessed Fuel Oil (“RFO”) volumes for 2012 decreased approximately 3.4% relative to 2011, primarily due to issues relating to the continuing tightening in the availability of rail cars and logistics in the transportation of RFO to re-refinery outlets. The general economic slowdown in the fourth quarter along with normal seasonal slowness, including a reduction in demand from asphalt markets, resulted in weakness in margins.
2013 Outlook & Financial Guidance
“We believe the challenges of 2012 are subsiding - capital budgets are being reset and we see increased momentum from high oil prices,” stated Mr. Johnsrud. “The efficiency gains we saw in 2012 reduced the drilling and completion costs of a well for our customers. This is a positive for Heckmann as it makes drilling more economic for our customers, and in turn drives demand for our environmental solutions. A full suite of environmental solutions is increasingly important and we believe we can capture additional market share relative to regional competitors, as well as companies that offer environmental solutions as only a part of their other services.”
I take the man for his word and so far the gang has not disappointed. If folks want to use a magnifying glass to find something negative going forward,,,go for it....I maintain my outlook that HEK very soon to be NES has tremendous potential and the risk factor has been minimized far from when folks were gladly paying $5 & $6 a share. I can wait until the pudding is done...when they finally see the proof. Long, Strong, Patient