Heckmann (NYSE:HEK)

Third Quarter and Recent Highlights

 

•

Record revenues from Heckmann Water Resources (“HWR”) of $47.8 million, compared with $1.9 million in the third quarter of 2010.

 

•

Net income from continuing operations grew to $2.6 million, or $0.02 per share, compared with a net loss of $2.2 million, or ($0.02) per share, in the third quarter of 2010.

 

•

Adjusted EBITDA from continuing operations improved to $11.0 million, compared with $(0.5) million in the third quarter of 2010.

 

•

Completed the divestiture of the current operations of China Water & Drinks, Inc. to focus Company resources on growth opportunities among its core U.S. water solutions business.

 

•

Increased produced water pipeline production to 30,000 average barrels of water per day from 17,000 last quarter.

 

•

Added another senior executive with significant experience in the water business: W. Christopher Chisholm named Executive Vice President and Chief Financial Officer, effective November 15, 2011

• Revenues for the first quarter ended March 31, 2011 totaled $23.8 million compared with $8.6 million for the same year-ago period.

• Net income for the first quarter of 2011 was $0.3 million, or $0.01 on an adjusted per share basis, based on 108.5 million weighted shares outstanding, compared with a net loss of $(0.3) million, or adjusted break-even, based on 108.8 million weighted shares outstanding for the first quarter of 2010.

“The first quarter of 2011 marks the realization of many months of hard work, perseverance and commitment by this management team to build a world-class enterprise focused exclusively on providing water solutions, particularly those that support energy development,” said Richard J. Heckmann, Chairman and CEO of Heckmann Corporation. “After addressing the challenges in China that began in March of 2009, we have established a U.S. energy business designed to scale rapidly in order to address the enormous opportunities available to the only fully integrated, one-stop-shop water service provider to the producers of natural gas.”

“While the Company’s growth to date and outlook for this year is dramatic, we have significant room to grow before we maximize the revenue and earnings potential from the operations we currently own. Having added seasoned executives with substantial water and energy experience to our corporate infrastructure, our industry relationships and early entry into this market give us a head-start advantage as we continue to pursue attractive opportunities for organic and acquisitive growth. As our country moves toward a long-term goal of energy independence, the potential within the domestic energy industry is staggering – and all energy producers must address water issues. Our Company will continue to invest aggressively to expand our fully integrated scope of water services to support shale oil and natural gas production.”

Fourth Quarter Results:

• Revenues for the fourth quarter ended December 31, 2010 totaled $14.3 million compared with $8.7 million for the same year-ago period.
• Net income for the fourth quarter of 2010 was $236,000 or $0.00 per share based on 108.8 million weighted shares outstanding, compared with net income of $77,000, or $0.00 based on 108.8 million weighted shares outstanding for the fourth quarter of 2009.
• Adjusted EBITDA for the three months ended December 31, 2010 totaled $1.6 million, compared with adjusted EBITDA of $0.1 million for the fourth quarter of 2009.

Richard J. Heckmann, Chairman and CEO of Heckmann Corporation, stated, "Heckmann Water Resources has made outstanding progress in its expansion in four of the highest producing shale plays in the U.S. Last year was a highly productive period in the Company’s development, and to date, 2011 has been equally active, as we have established a strong and highly competitive presence in the Haynesville Shale area and a developing presence in the Marcellus Shale, Eagle Ford Shale and Barnett Shale areas. In the past 90 days we have moved forward on five acquisitions and have begun discussions on several more. Combined revenues of these five privately held companies are expected to exceed $45.0 million for the remainder of 2011. Upon closing of the slated acquisitions, our all-inclusive water solutions platform for unconventional oil and gas exploration and production will offer total treatment and disposal capacity of approximately 300,000 barrels per day through an extensive network of fresh and produced water transport pipeline, other transport assets, disposal wells, and treatment and terminal facilities."

Company currently expects 2011 revenues in excess of $150 million and 2011 EBITDA of approximately $40 million.

Third Quarter 2010 Financial Results

• Revenues for the third quarter ended September 30, 2010 totaled $11.1 million compared with $11.2 million for the same year-ago period, although as reported above, three China Water facilities were either closed or deconsolidated prior to the third quarter of 2010.

• Net loss for the third quarter of 2010 was $(1.8) million or $(0.02) on a per share basis compared with a net loss of $(210.6) million, or $(1.93) for the third quarter of 2009. The net loss for the third quarter of 2010 included $590,000 of pipeline start up and commissioning expenses associated with HWR’s Haynesville Shale operations.

Mr. Richard J. Heckmann, Chairman and CEO of Heckmann Corporation, stated, “The third quarter of 2010 was by far the most productive period in our company’s history. With the appointments of Chuck Gordon as President and Chief Operating Officer and director Robert Simonds as Vice Chairman, we added extensive water industry expertise and recognition to our management team, allowing us to move forward with even greater momentum in our produced water business. Bob and Chuck are now engaged in all aspects of our domestic businesses and China Water President John Cheng continues to grow our China operations.

“Our planned acquisition of Complete Vacuum and Rental Inc. (“CVR”) announced yesterday positions us as a leader in the disposal of produced water in the Haynesville Shale region. The combined platform integrates HWR’s pipeline with the water handling needs that the region’s oil and gas exploration and production (E&P) customers require for all-inclusive water transport and disposal. We now supply everything from tanks and trucks to tractors and trailers to pipeline and deep injection disposal wells – a full service model that can be economically replicated in other shale gas regions. We should see the positive financial impact of the CVR acquisition beginning in the current quarter, and we have already begun expansion of the combined operations into the Eagle Ford and Barnett Shale areas.

“In the Marcellus Shale,” Mr. Heckmann continued, “Energy Transfer Water Solutions’ placement of our first mobile treatment unit for a paid demonstration test marks an important step forward in establishing the value of that evolving technology for recycling frac and produced waters for reuse as frac solutions. We have established an agreement with one of Pennsylvania’s major producers and continue to design and develop other pipeline opportunities across the Marcellus distribution region.

“With our considerable entry into the U.S. water sector so far this year, we look forward to continuing the expansion and growth in this part of our business. We will begin 2011 with expected annual revenues well in excess of $100 million and an impressive industry platform operating in the most productive shale regions in the country.”

Mr. Richard J. Heckmann, Chairman and CEO of Heckmann Corporation, stated, “2009 presented its share of issues for our management but we have successfully turned the corner in China and will continue to maximize shareholder value through growth and expansion there."

Source: Business Wire (March 11, 2010)

Based on current capacity levels, business trends, and anticipated acquisitions, China Water’s management projects revenue in 2008 to be approximately $220.0 million and net income in 2008 to be approximately $70.0 million, including the addition of five acquisitions currently under contract or in negotiations. This guidance assumes that the acquisitions currently under contract or in negotiations closed on January 1, 2008 and thus reflects the full-year impact.

The company has not disclosed the tax assumption in the guidance.

(Source: Press, May 20, 2008)