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CALGARY, ALBERTA--(Marketwire
- Jan. 24, 2011) - Open Range Energy Corp. (TSX:ONR) ("Open
Range" or the "Company") is pleased to provide an update
on its wholly-owned business unit, Poseidon Concepts, which generated
EBITDA and cash flow from operations estimated at $4.9 million in the
seven months ended December 31, 2010.
Poseidon Concepts designs, manufactures and operates an innovative
fracturing fluid handling system using a patent-pending modular,
insulated tank system that offers significant cost and operating
advantages. The system has met with enthusiastic response from
exploration and production companies in western Canada and is currently
being deployed in the United States.
Levering Technology Innovation
The Poseidon Concepts system was conceived, designed, tested and rolled
out by Open Range personnel as part of the Company's continuous efforts
to reduce the costs of exploration, development and operations at its
core Ansell/Sundance Deep Basin property.
Following successful application of the experimental system on several
of the Company's Deep Basin liquids-rich natural gas wells in early
2010, Open Range in Q2 2010 formed the Poseidon Concepts business unit
under the operating direction of Cliff Wiebe.
Mr. Wiebe has over 25 years of industry
experience primarily focused on completion operations and related
energy services, and has been Open Range's completions superintendent
for the past three years.
The insulated and modular tank system's advantages include greatly
increased storage capacity to accommodate larger fracturing operations,
improved portability, more efficient fluid heating process and reduced
environmental footprint, all of which deliver cost savings versus the
traditional approach of using multiple smaller standing tanks or lined
pits.
Western Canada Operations
Poseidon Concepts provides systems on a rental basis to oil and natural
gas producers across western Canada. The first revenue-generating job
was performed in June and initial rentals focused on Alberta's Deep
Basin. Industry acceptance has generated progressive increase in
demand.
Fabrication of tank systems for western Canadian operations is
continuing through an Alberta-based third-party manufacturer and was
scaled up in Q4 2010 to meet increasing industry demand.
Poseidon Concepts' sales and marketing are being led by Brad Wanchulak, who has extensive business development
experience in western Canada's energy sector.
Expansion into the United States
In late Q4 2010, Poseidon Concepts expanded into North Dakota as its
initial step towards servicing the multiple oil and natural gas basins
in the United States. Intensive and growing industry activity in North
Dakota made this the logical entry point, gaining exposure to multiple
intermediate to senior U.S. producers while remaining in relative
proximity to Poseidon Concepts' western Canada base.
Fabrication of tank systems for the U.S. operations is now underway
using a large third-party manufacturer based in the U.S. The first
U.S.-built system was recently field-deployed in North Dakota.
Poseidon Concepts' U.S. operations recently received a one-year minimum
commitment for the provision of multiple fluid handling systems to a
major U.S. oil and natural gas company operating in North Dakota.
Financial
Open Range is expecting the Poseidon Concepts business unit to generate
cash flow from operations and EBITDA of approximately $3.3 million for
the fourth quarter of 2010, compared to $1.3 million in the third
quarter of 2010, representing a more than 150 percent
quarter-over-quarter increase.
Cash flow from operations and EBITDA in the seven months ended December
31, 2010, representing Poseidon Concepts' operations since inception, are expected to be $4.9 million. Revenue per job
averaged approximately $86,000 during this period.
Outlook
With demand for fracturing services and related equipment in Canada and
the U.S. remaining strong, particularly for unconventional oil and
liquids-rich natural gas reservoirs being developed with horizontal
wells and larger fracturing operations, Open Range anticipates
continued growth of the Poseidon Concepts tank fleet.
Poseidon Concepts currently has 45 fluid handling systems in the field,
with approximately 20 percent of the expanding fleet expected to be
servicing U.S. operations by mid-February. The majority of the fleet is
deployed at unconventional oil and liquids-rich natural gas plays. The
strong operating environment is driving a high utilization rate and
solid operating margins.
Open Range forecasts business unit cash flow from operations and EBITDA
of $8.5 million for the first half of 2011. Poseidon Concepts' capital
expansion requirements are expected to be fully financed using a
portion of the business unit's cash flow from operations, with the
balance of the business unit's cash flow contributing to Open Range's
continuing exploration and development program.
Reader Advisory
This news release contains certain forward-looking statements, which
include assumptions with respect to (i)
demand for Poseidon Concepts' tank systems and the corresponding
utilization rate and operating margins; (ii) future capital
expenditures and how they will be financed; (iii) cash flow from
operations and EBITDA; and (iv) general oil and gas industry activity.
The reader is cautioned that assumptions used in the preparation of
such information may prove to be incorrect. All such forward-looking
statements involve substantial known and unknown risks and
uncertainties, certain of which are beyond Open Range's control. Such
risks and uncertainties include, without limitation, risks associated
with the manufacture and supply of fracturing fluid handling systems,
marketing and transportation, loss of markets, volatility of commodity
prices, currency and interest rate fluctuations, environmental risks,
competition from other fluid handling system suppliers, inability to
obtain required regulatory approvals and ability to access sufficient
capital from internal and external sources, the impact of general
economic conditions in Canada and the United States, 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, as well as stock
market volatility and market valuations of companies with respect to
announced transactions and the final valuations thereof. Open Range's
actual results, performance or achievements could differ materially
from those expressed in, or implied by, these forward-looking
statements and, accordingly, no assurances can be given that any of the
events anticipated by the forward-looking statements will transpire or
occur, or if any of them do, what benefits, including the amount of
proceeds, Open Range will derive therefrom.
Readers are cautioned that the foregoing list of factors is not
exhaustive. All subsequent forward-looking statements, whether written
or oral, attributable to Open Range 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 Open Range's operations and financial results are included
in the Company's annual information form and other reports 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 Open Range
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.
THE TORONTO STOCK EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED OF THE
INFORMATION CONTAINED HEREIN.
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