Divestco Inc. (TSX VENTURE:DVT) ("Divestco" or the "Company") announces its
operating results for the three months ended March 31, 2012.
Divestco generated net income for the first quarter of 2012 of $2.6 million
($0.04 per share - basic and diluted) compared to a net loss of $4.3 million
($0.07 per share - basic and diluted) for the same period in 2011. EBITDA was
$7.5 million in Q1 2012, an $8.3 million increase from a loss of $0.9 million
for the same period in 2011. The Company generated funds from operations of $7.2
million ($0.11 per share - basic and diluted) for the first quarter of 2012, an
increase of $8.1 million as compared to funds used in operations of $0.9 million
($0.01 per share - basic and diluted) for the same period in 2011. EBITDA and
funds from operations are gross of capital expenditures of $8.6 million, mainly
comprised of seismic data acquisition costs.
During Q1 2012, Divestco generated revenue of $14.5 million compared to $8.8
million in Q1 2012, an increase of $5.7 million (64%) indicative of continued
improvement in industry activity levels. Revenue in the Seismic Data segment
increased by $5.2 million (346%) as the Company completed two new seismic
participation surveys and commenced a third survey in Q1 2012. In line with
strong oil prices, the surveys were shot within predominantly oil prospective
areas. Revenue in the Services segment improved by $458,000 (9%) as the demand
for seismic processing and geomatics was stronger. Revenue in the Software and
Data segment decreased by $45,000 (2%) due to lower software and support data
revenues offset by higher log data revenues.
Operating expenses decreased by $2.7 million (27%) to $7 million in Q1 2012 from
$9.7 million in Q1 2011. Salaries and wages were down $351,000 (7%) mainly due
to lower headcounts. General and administrative costs were down $2.3 million
(52%) mainly due to lower occupancy costs as the Company surrendered a number of
floors of office space in 2011. In addition, professional fees and bad debt
expenses decreased by $386,000 (41%). Finance costs decreased by $397,000
primarily due to a vendor agreeing to reverse interest charges on overdue
invoices which were paid in full. Depreciation and amortization increased by
$1.8 million (52%) due to the completion of two seismic participation surveys in
Q1 2012.
Seismic Data Update
In Q1 2012, Divestco completed two 3D seismic participation surveys (Brazeau and
Big Valley), covering an area of approximately 265 square kilometers. In Q1
2012, the Company commenced its Ante Creek survey which was completed in April
2012 and covers approximately 114 square kilometers. Total cost incurred in Q1
2012 for the three seismic surveys was $8.4 million.
Mr. Stephen Popadynetz, CEO, President and CFO: "We are very pleased to report
that Divestco had a profitable quarter and continued to reduce its operating
expenses while increasing revenues. We are also pleased with the progress we
have made towards rebuilding our seismic data library. To date we have added
more than 760 square kilometers of seismic to our library. Overall demand for
seismic data and general activity levels in the industry so far this year appear
to be trending positively. We are well on track to sustained profitability and
positive earnings and we look forward to delivering better results for our
shareholders."
Non-GAAP Measures
The Company's consolidated financial statements have been prepared in accordance
with IFRS. Certain measures in this document do not have any standardized
meaning as prescribed by IFRS and are considered non-GAAP measures. These terms
are not measures that have any standardized meaning prescribed by IFRS and are
considered non-GAAP measures. While these measures may not be comparable to
similar measures presented by other issuers, they are described and presented in
this MD&A to provide shareholders and potential investors with additional
information regarding the Company's results, liquidity, and its ability to
generate funds to finance its operations. These measures include:
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
Divestco uses EBITDA as a key measure to evaluate the performance of its
segments and divisions as well as the Company overall, with the closest IFRS
measure being net income or loss. EBITDA is a measure commonly reported and
widely used by investors as indicators of the Company's operating performance
and ability to incur and service debt, and as a valuation metric. The Company
believes EBITDA assists investors in comparing the Company's performance on a
consistent basis without regard to financing decisions and depreciation and
amortization, which are non-cash in nature and can vary significantly depending
upon accounting methods or non-operating factors such as historical cost.
EBITDA is not a calculation based on IFRS and should not be considered
alternatives to net income or loss in measuring the Company's performance. As
well, EBITDA should not be used as an exclusive measure of cash flow, because it
does not consider the impact of working capital growth, capital expenditures,
debt principal reductions and other sources and uses of cash, which are
disclosed in the consolidated statements of cash flows. While EBITDA has been
disclosed herein to permit a more complete comparative analysis of the Company's
operating performance and debt servicing ability relative to other companies,
investors should be cautioned that EBITDA as reported by Divestco may not be
comparable in all instances to EBITDA as reported by other companies. Investors
should also carefully consider the specific items included in Divestco's
computation of EBITDA.
The following is a reconciliation of EBITDA with net income (loss):
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Three Months Ended March 31
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(Thousands) 2012 2011
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Net Income (Loss) $ 2,645 $ (4,332)
Income Tax Expense - 49
Finance Costs (Income) (360) 37
Depreciation and Amortization 5,165 3,389
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EBITDA $ 7,450 $ (857)
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Funds from operations
Divestco reports funds from operations because it is a key measure used by
management to evaluate its performance and to assess the ability of the Company
to finance operating and investing activities. Funds from operations excludes
certain working capital changes and other sources and uses of cash, which are
disclosed in the consolidated statements of cash flows.
Funds from operations is not a calculation based on IFRS and should not be
considered an alternative to the consolidated statements of cash flows. Funds
from operations is a measure that can be used to gauge Divestco's capacity to
generate discretionary cash flow. Investors should be cautioned that funds from
operations as reported by Divestco may not be comparable in all instances to
funds from operations as reported by other companies. While the closest IFRS
measure is cash from operating activities, funds from operations is considered
relevant because it provides an indication of how much cash generated by
operations is available before proceeds from divested assets and changes in
certain working capital items.
The following reconciles funds from operations with cash from operating activities:
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Three Months Ended March 31
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(Thousands) 2012 2011
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Cash from Operating Activities $ 12,761 $ (2,246)
Changes in non-cash Working Capital
Balances Related to Operating
Activities (5,147) 1,464
Interest (Received) Paid (407) 16
Income Taxes Refunded - (103)
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Funds from (used in) Operations $ 7,207 $ (869)
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Working capital
Working Capital is calculated as current assets minus current liabilities
(excluding deferred revenue). Working capital provides a measure that can be
used to gauge Divestco's ability to meet its current obligations.
Financial Highlights
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Financial Results (Thousands, Except Per Share Amounts)
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Three Months Ended March 31
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2012 2011 $ Change % Change
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Revenue $14,466 $ 8,815 $ 5,651 64%
Operating Expenses 7,015 9,672 (2,657) -27%
Other Loss (Income) 1 - 1 N/A
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EBITDA 7,450 (857) 8,307 N/A
Finance Costs (Income) (360) 37 (397) -1073%
Depreciation and Amortization 5,165 3,389 1,776 52%
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Income (Loss) before Income Taxes 2,645 (4,283) 6,928 N/A
Income Tax Expense - 49 (49) N/A
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Net Income (Loss) $ 2,645 $ (4,332) $ 6,977 N/A
Per Share - Basic and Diluted 0.04 (0.07) 0.11 N/A
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Funds from (used in) Operations $ 7,207 $ (869) $ 8,076 N/A
Per Share - Basic and Diluted 0.11 (0.01) N/A N/A
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Shares Outstanding 66,615 59,393 N/A N/A
Weighted Average Shares Outstanding
Basic and Diluted 66,613 59,344 N/A N/A
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Balance Balance Balance
at at at
Mar 31 Dec 31 Dec 31
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2012 2011 2010
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Total Assets $ 44,683 $ 43,761 $ 34,984
Working Capital (Deficiency) (1) (4,385) 297 3,599
Long-Term Financial Liabilities (2) 7,882 8,610 3,907
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(1) Excludes the current portion of deferred revenue of $3.6 million
(December 31, 2011: $4.6 million; December 31, 2010: $3.9 million)
(2) Includes long-term debt obligations, deferred rent obligations,
sublease loss provision and other long-term liabilities. The long-term
debt obligations are comprised of the Company's subordinated debt,
shareholder loans and finance leases
Segment Review Summary
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For the three months ended March 31, 2012 (Thousands)
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Corporate
Software Services Data & Other Total
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Revenue $ 2,132 $ 5,584 $6,750 $ - $14,466
EBITDA 487 1,947 5,989 (973) 7,450
Finance costs (income) - (1) (4) (355) (360)
Depreciation and
Amortization 800 230 3,934 201 5,165
Income (loss) before
income taxes (313) 1,718 2,059 (819) 2,645
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For the three months ended March 31, 2011 (Thousands)
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Corporate
Software Services Data & Other Total
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Revenue $ 2,177 $ 5,126 $1,512 $ - $ 8,815
EBITDA 770 1,402 567 (3,596) (857)
Finance costs (income) - (1) (3) 41 37
Depreciation and
Amortization 1,248 400 968 773 3,389
Income (loss) before
income taxes (478) 1,003 (398) (4,410) (4,283)
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Divestco Inc.
Condensed Consolidated Interim Statement of Financial Position
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March 31 December 31
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(Thousands - Unaudited) 2012 2011
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Assets
Current Assets
Cash $ 1,818 $ 1,547
Funds held in trust 48 40
Accounts receivable 10,765 11,810
Prepaid expenses, supplies and deposits 382 235
Income taxes receivable 194 110
Asset held for sale - 2,500
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Total current assets 13,207 16,242
Investment in affiliated company 128 141
Participation surveys in progress 3,809 5,108
Property and equipment 4,000 4,147
Intangible assets 23,539 18,123
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Total assets $ 44,683 $ 43,761
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Liabilities and Shareholders' Equity
Current Liabilities
Bank indebtedness $ 4,250 $ 3,700
Accounts payable and accrued liabilities 10,111 10,669
Deferred revenue 3,560 4,561
Current loss on sublease loss provision 322 320
Current portion of long-term debt obligations 2,796 1,143
Current portion of tenant inducement 113 113
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Total current liabilities 21,152 20,506
Deferred rent obligations 867 1,124
Long-term debt obligations 2,646 4,591
Sublease loss provision 1,251 1,332
Tenant Inducements 1,369 1,397
Other long-term liabilities - 100
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Total liabilities 27,285 29,050
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Shareholders' Equity
Equity instruments 76,432 76,431
Contributed surplus 5,704 5,663
Deficit (64,738) (67,383)
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Total shareholders' equity 17,398 14,711
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Total liabilities and shareholders' equity $ 44,683 $ 43,761
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Divestco Inc.
Condensed Consolidated Interim Statement of Income (Loss) and Comprehensive
Income (Loss)
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Three months ended March 31
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(Thousands, Except Per Share Amounts -
Unaudited) 2012 2011
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Revenue $ 14,466 $ 8,815
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Operating expenses
Salaries and benefits 4,808 5,159
General and administrative 2,166 4,513
Stock compensation expense 41 -
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Total operating expenses 7,015 9,672
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Finance costs (income) (360) 37
Depreciation and amortization 5,165 3,389
Other loss 1 -
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Income (loss) before income taxes 2,645 (4,283)
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Income taxes
Current - 49
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Net income (loss) and comprehensive
income (loss) for the period $ 2,645 $ (4,332)
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Net income (loss) per share
Basic and Diluted $ 0.04 $ (0.07)
Weighted average number of shares
Basic and Diluted 66,613 59,344
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Divestco Inc.
Condensed Consolidated Interim Statement of Changes in Equity
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Number Number
of of
(Thousands - Shares Share Warrants Equity
Unaudited) Issued Capital Issued Warrants Instruments
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Balance at January 1, 2011 58,938 $ 73,445 15,825 $ 1,808 $ 75,253
Net loss and comprehensive
loss for the period
Transactions with owners,
recorded in equity
contributions by and
distributions to owners:
Issue of Class A common
shares 455 48 455 52 100
Share issue costs (1) (1)
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Balance at March 31, 2011 59,393 $ 73,492 16,280 $ 1,860 $ 75,352
Balance at January 1, 2012 66,610 $ 74,571 16,280 $ 1,860 $ 76,431
Net income and
comprehensive income for
the period
Issue of Class A common
shares 5 1 1
Share-based payment
transactions -
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Balance at March 31, 2012 66,615 $ 74,572 16,280 $ 1,860 $ 76,432
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Divestco Inc.
Condensed Consolidated Interim Statement of Changes in Equity
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Retained
(Thousands - Contributed Earnings Total
Unaudited) Surplus (Deficit) Equity
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Balance at January 1, 2011 $ 5,590 $ (62,773) $ 18,070
Net loss and comprehensive
loss for the period (4,332) (4,332)
Transactions with owners,
recorded in equity
contributions by and
distributions to owners:
Issue of Class A common
shares 100
Share issue costs (1)
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Balance at March 31, 2011 $ 5,590 $ (67,105) $ 13,837
Balance at January 1, 2012 $ 5,663 $ (67,383) $ 14,711
Net income and
comprehensive income for
the period 2,645 2,645
Issue of Class A common
shares 1
Share-based payment
transactions 41 41
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Balance at March 31, 2012 $ 5,704 $ (64,738) $ 17,398
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Divestco Inc.
Condensed Consolidated Interim Statement of Cash Flows
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Three months ended March 31
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(Thousands - Unaudited) 2012 2011
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Cash from operating activities
Net income (loss) for the period $ 2,645 $ (4,332)
Items not affecting cash:
Equity investment income (1) (4)
Depreciation and amortization 5,165 3,389
Amortization of tenant inducements (28) (7)
Deferred rent obligations (258) -
Income taxes - 49
Unrealized foreign exchange loss 2 (1)
Non-cash employment benefits 1 -
Share-based payments 41 -
Finance costs (360) 37
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Funds from (used in) operations 7,207 (869)
Changes in non-cash working capital
balances 5,147 (1,464)
Interest paid (received) 407 (16)
Income taxes refunded (paid) - 103
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Net cash from (used in) operating
activities 12,761 (2,246)
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Cash from (used in) financing activities
Bank indebtedness 550 950
Advances to affiliated company 14 -
Issue of common shares (net of related
costs) - 99
Repayment of long-term debt obligations (329) (117)
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Net cash from (used in) financing
activities 235 932
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Cash from (used in) investing activities
Additions to intangible assets (9,780) (2,453)
Decrease (increase) in participation
surveys in progress 1,299 1,176
Purchase of property and equipment (151) (3,624)
Additions to tenant inducements - 3,035
Payments towards sublease loss provision (89) -
Investment in affiliates - (29)
Deferred development costs (587) (710)
Changes in non-cash working capital
balances (3,417) 1,822
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Net cash from (used in) investing
activities (12,725) (783)
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Increase (decrease) in cash 271 (2,097)
Cash, beginning of period 1,547 3,696
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Cash, end of period $ 1,818 $ 1,599
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Divestco is an exploration services company that provides a comprehensive and
integrated portfolio of data, software, and services to the oil and gas
industry. Through continued commitment to align and bundle products and services
to generate value for customers, Divestco is creating an unparalleled set of
integrated solutions and unique benefits for the marketplace. Divestco's breadth
of data, software and services offers customers the ability to access and
analyze the information required to make business decisions and to optimize
their success in the upstream oil and gas industry. Divestco is headquartered in
Calgary, Alberta, Canada and trades on the TSX Venture Exchange under the symbol
"DVT".
This press release contains forward-looking information related to the Company's
capital expenditures, projected growth, view and outlook towards future oil and
gas prices and market conditions, and demand for its products and services.
Statements that contain words such as "could', "should", "can", "anticipate",
"expect", "believe", "will", "may" and similar expressions and statements
relating to matters that are not historical facts constitute "forward-looking
information" within the meaning applicable by Canadian securities legislation.
Although management of the Company believes that the expectations reflected in
such forward-looking information are reasonable, there can be no assurance that
such expectations will prove to have been correct because, should one or more of
the risks materialize, or should the assumptions underlying forward-looking
statements or forward-looking information prove incorrect, actual results may
vary materially from those described in this press release as intended, planned,
anticipated, believed, estimated or expected. Readers should not place undue
reliance on forward-looking statements or forward-looking information. All of
the forward-looking statements and forward-looking information of the Company
contained in this press release are expressly qualified, in their entirety, by
this cautionary statement. Except where required by law, the Company does not
assume any obligation to update these forward-looking statements or
forward-looking information if conditions or opinions should change.
In particular, this press release contains forward-looking statements pertaining
to the following: Company's ability to keep debt and liquidity at acceptable
levels, improve/maintain its working capital position and maintain profitability
in the current economy; availability of external and internal funding for future
operations; relative future competitive position of the Company; nature and
timing of growth; oil and natural gas production levels; planned capital
expenditure programs; Supply and demand for oil and natural gas; future demand
for products/services; commodity prices; impact of Canadian federal and
provincial governmental regulation on the Company; expected levels of operating
costs, finance costs and other costs and expenses; future ability to execute
acquisitions and dispositions of assets or businesses; expectations regarding
the Company's ability to raise capital and to add to seismic data through new
seismic shoots and acquisition of existing seismic data; treatment under tax
laws; and new accounting pronouncements.
These forward-looking statements are based upon assumptions including: future
prices for crude oil and natural gas; future interest rates and future
availability of debt and equity financing will be at levels and costs that allow
the Company to manage, operate and finance its business and develop its software
products and various oil and gas datasets including its seismic data library,
and meet its future obligations; the regulatory framework in respect of
royalties, taxes and environmental matters applicable to the Company and its
customers will not become so onerous on both the Company and its customers as to
preclude the Company and its customers from viably managing, operating and
financing its business and the development of its software and data; and that
the Company will continue to be able to identify, attract and employ qualified
staff and obtain the outside expertise as well as specialized and other
equipment it requires to manage, operate and finance its business and develop
its properties.
These forward-looking statements are subject to numerous risks and
uncertainties, certain of which are beyond the Company's control, including:
general economic, market and business conditions; volatility in market prices
for crude oil and natural gas; ability of Divestco's clients to explore for,
develop and produce oil and gas; availability of financing and capital;
fluctuations in interest rates; demand for the Company's product and services;
weather and climate conditions; competitive actions by other companies;
availability of skilled labour; failure to obtain regulatory approvals in a
timely manner; adverse conditions in the debt and equity markets; and government
actions including changes in environment and other regulation.
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