Operating Highlights for 2012 Year
-- Coil Well Service - Essential increased the breadth and depth of its coil well service fleet through the Technicoil Acquisition and execution of its capital program. The year-over-year increase in coil well service revenue was due to the timing of the Technicoil Acquisition in 2011.-- Service Rigs - Essential increased the size of its service rig fleet through the nine service rigs added with the Technicoil Acquisition and another three rigs as part of Essential's 2012 capital program. The year-over-year increase in service rig revenue was due to the timing of the Technicoil Acquisition and service rigs working on SAGD wells.-- Downhole Tools & Rentals - Experienced staff and the continued introduction of innovative technical solutions contributed to Essential's strong performance in both Tryton MSFS and conventional tools during the year.
Business Strategy Highlights
Management further refined the operating, geographical and financial focus of the Company by the following activities:
-- In February 2012, Essential divested of its wireline operations for proceeds of $7.5 million.-- In March 2012, Essential implemented a quarterly dividend of $0.025 per share.-- In November 2012, Essential divested of five hybrid coil drilling rigs for proceeds of $16.8 million ($14.8 million received at closing and $2 million received in February 2013).-- Essential committed to a plan to divest of its Colombian operations. This decision was based on the inability to secure long-term service contracts, inconsistent utilization and poor financial performance of the operation since Essential commenced commercial operations in mid- 2011.-- During 2012, long-term debt was reduced from $63.5 million to $35.6 million at December 31, 2012. Cash proceeds from the sale of the wireline and hybrid coil drilling rigs were used to reduce long term debt.
Capital Spending Highlights
2012 capital spending was focused on expanding the service capabilities and depth capacity of Essential's coil well service and service rig fleets. Total 2012 capital spending was $51.8 million (consisting of $38.2 million in growth capital and $13.6 million in maintenance capital). Essential experienced delivery delays with equipment manufacturers resulting in $11.2 million of planned 2012 capital spending being deferred to 2013. Essential continues to focus on investing in high demand assets in addition to maintaining and enhancing its existing fleet. During the fourth quarter, Essential commissioned one conventional deep coil tubing rig, two fluid pumpers and three nitrogen pumpers.
SALE PROCESS FOR COLOMBIAN OPERATIONS
Essential is seeking buyers for its Colombian operations. The decision comes after almost two years of operations in Colombia as inconsistent utilization has hindered financial performance. The two rod rigs and the rod rig accelerator are currently under contracts that expire in May 2013 and June 2013. Essential will continue to operate these assets until the contracts expire. Essential does not intend to operate any of the other equipment while it seeks a buyer.
For 2012, Essential reported a net loss related to Colombian operations of $8.9 million, including the revaluation of assets. This is detailed under "Discontinued Operations".
In late 2010, Essential sent to Colombia a small fleet of primarily shallow-focused well servicing equipment that was underutilized in Canada. In the second quarter of 2011, Essential commenced operations in the mid-Magdalena basin. The Company currently has two coil tubing rigs, two nitrogen pumpers, two service rigs, two rod rigs, one rod rig accelerator and support equipment in Colombia.