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Note: In the prior year, the Corporation completed the acquisition of Marquis Alliance Energy Group Inc. and its wholly owned subsidiaries ("Marquis Alliance") and XL Fluids Systems Inc. ("XL Fluids"), creating the DS division. In 2012, Secure has reclassified certain costs previously included in the PRD division, including segregating out costs associated with Corporate overhead. Accordingly, any reclassifications in 2012 were adjusted in the prior year to conform to current period presentation.
Highlights for the PRD division included:
-- Revenue from processing, recovery and disposal for the three and twelve months ended December 31, 2012 increased by 34% and 56%, respectively compared to the same periods of 2011. Revenue increases over the prior year and quarter are due to processing volume increases of 110% and 35% respectively and disposal volume increases of 37% and 29% respectively. Overall volumes have increased as a result of: -- New facility additions and expansions in late 2011 and throughout 2012 which include the new Drayton Valley FST in the fourth quarter of 2011; the acquisition of the Silverdale FST in October 2011; the new Wild River SWD permanent facility in the second quarter of 2012; the expansions of Obed, Fox Creek and Dawson FSTs; the acquisition of DRD in July 2012; the new Crosby, North Dakota SWD in December 2012; and the new Fox Creek Landfill in December of 2012 (the "new facilities and expansions"); -- Increased demand over the prior year and quarter as processing volumes from existing facilities that were in operation at the same respective periods in 2012 and 2011 continued to see growth.-- Recovery revenue from the sale of oil recovered through waste processing, crude oil handling, marketing and terminalling increased by 21% and 49% for the three and twelve months ended December 31, 2012 compared to the same period in 2011. The amount of recovery revenue increased with the addition of new facilities and expansions during the year, with higher processing volumes and due to the Corporation's ability to capitalize on crude oil marketing opportunities at its FSTs.-- Operating expenses from PRD services for the three and twelve months ended December 31, 2012 increased to $13.9 million and $50.2 million respectively from $10.8 million and $34.6 million for the comparative periods of 2011. The increase in operating expenses year over year and quarter over quarter relates to the new facilities and expansions added organically, the Silverdale and DRD acquisitions and due to an increase in processing volumes from existing facilities. In addition, the Corporation incurred start-up costs for the Fox Creek landfill and Crosby SWD which both became operational in December of 2012.-- Operating margin as a percentage of revenue was 62% and 61% for the three and twelve months ended December 31, 2012 compared to 61% and 59% for the same respective periods of 2011. The two percentage point year over year increase was a result of improvements in operating efficiencies at the facilities and improved weather conditions experienced during the year. The Corporation did not experience the same weather conditions in 2012 as it did in 2011. Weather conditions in 2011 added approximately $2.0 million to operating expenses as a result of increased road maintenance, site and equipment, and leachate disposal expenses due to heavy rains. In the fourth quarter of 2012, operating costs and margins improved by 1% due to operating efficiencies, however the improvement was marginally impacted by freezing rain in early November increasing road and site costs and from startup costs related to the new facilities opened in December.-- General and administrative ("G&A") costs have increased for the three and twelve months ended December 31, 2012 compared to the same periods of 2011 as a result of new employees hired to support growth in the PRD division in Canada and the United States, information system expenses and the establishment of the PRD divisional office in Denver, Colorado. G&A as a percentage of revenue improved to 11% for the twelve months ended December 31, 2012 compared to 12% for the twelve months ended December 31, 2011. G&A as a percentage of revenue for the three months ended December 31, 2012 was 12% which was consistent to the fourth quarter of 2011.DS DIVISION OPERATING HIGHLIGHTS Three Months Ended Dec 31, Year Ended Dec 31, % %($000's)(1) 2012 2011 Change 2012 2011 Change--------------------------------------------------------------------------------------------------------------------------------------------------------Revenue Drilling services (a) 71,797 74,675 (4) 262,299 147,706 78Operating expenses Drilling services (b) 53,899 57,087 (6) 199,270 109,919 81 Depreciation and amortization 2,995 2,643 13 12,412 5,777 115 --------------------------------------------------------Total DS division operating expenses 56,894 59,730 (5) 211,682 115,696 83 General and administrative 7,199 5,620 28 26,867 12,036 123 --------------------------------------------------------Total DS division expenses 64,093 65,350 (2) 238,549 127,732 87 -------------------------------------------------------- --------------------------------------------------------Operating Margin (2) (a-b) 17,898 17,588 2 63,029 37,787 67Operating Margin % (2) 25% 24% 4 24% 26% (8)--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Includes DS division from its acquisition on June 1, 2011.(2) Refer to "Non GAAP measures and operational definitions"
