Epic Energy Resources Announces First Quarter Results

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May 13, 2010, 08:00 ET

HOUSTON, May 13 /PRNewswire-FirstCall/ -- Epic Energy Resources, Inc. (OTC Bulletin Board: EPCC) ("Epic") a provider of engineering, management consulting, training and data management services to the energy industry, today announced its financial and operating results for the three months ended March 31, 2010.

"The first quarter or 2010 was challenging for Epic," said John Ippolito, President and CEO. "Revenue decreased 33.2% compared to the same period in 2009. Loss from operations was $5.9 million and EBITDA was ($1.1) million. The Company is taking stringent measures to align our costs with our revenue. This effort should be largely complete by June."

First Quarter 2010 Financial Results:

Revenues were $6.0 million for the first quarter of 2010, a 33.2% decrease compared to the $9.0 million for the first quarter of 2009.
- Consulting fee revenue was $4.1 million for the first quarter of 2010, a 47.7% decrease as compared to $7.8 million for the first quarter of 2009.
- Reimbursed materials revenue was $1.9 million for the first quarter of 2010, a 57.3% increase as compared to $1.2 million for the first quarter of 2009.
Loss from operations was $5.9 million for the first quarter of 2010, a 659% increased loss compared to a $0.8 million loss for the first quarter of 2009.
EBITDA was ($1.1) million for the first quarter of 2010, a 152% decrease compared to a $2.2 million for the first quarter of 2009. EBITDA is a non-GAAP measure and is defined and reconciled to net income later in this press release.
During the first quarter of 2010, Epic had a net loss of $5.6 million, or ($0.13) per weighted average common shares outstanding, a 452% decrease compared to a net loss of $1.0 million, or $0.02 per share in the first quarter of 2009. Net loss in the quarter was negatively impacted by the following non-cash items: impairment charges to intangible assets, stock compensation expense, non-cash interest expense and depreciation and amortization expense. Excluding total non-cash expenses of $4.8 million, the first quarter 2010 net loss would have been $0.8 million or ($0.02) per share.

Conference Call

Epic will host a conference call to discuss its first quarter 2010 results on May 13, at 10:00 a.m. Eastern Time (9:00 a.m. Central). To access the call, please dial (888) 228-0568 at least 10 minutes prior to the start time. A telephonic replay of the conference call will be available on our website at www.1epic.com as well. For more information, please contact Mike Kinney at (281)863-9635 or email at [email protected].

About Epic

Epic Energy Resources, Inc. is a Houston based integrated energy services company. Epic provides business and operations consulting; engineering, procurement, and construction management; production operations & maintenance; specialized training, operating manuals, data management and data integration focused primarily on the upstream, midstream and downstream energy infrastructure. Epic is headquartered at 1450 Lake Robbins Drive, Suite 160, The Woodlands, Texas 77380. Office - 281-419-3742, www.1epic.com.

Forward Looking Statements

Certain statements included in this release constitute forward-looking statements. These forward-looking statements are based on management's belief and assumptions derived from currently available information. Although Epic Energy Resources ("Epic") believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Actual results could differ materially from forward-looking statements expressed or implied herein as a result of a variety of factors including, but not limited to: a decline in the price of, or demand for, oil and gas, demand for Epic's services, loss or unavailability of key personnel, inability to recruit or retain personnel, competition for customers and contracts, various potential losses associated with fixed-price contracts, general economic conditions; and other financial, operational and legal risks and uncertainties detailed from time to time in Epic's SEC filings. Epic does not undertake any obligation to publicly update forward looking statements contained herein to reflect subsequent events or circumstances.

(1) This earnings release contains references to the non-GAAP financial measure of earnings (net income) before interest, taxes, depreciation and amortization, or "EBITDA." EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. However, Epic believes EBITDA is a useful supplemental financial measure used by its management and directors and by external users of its financial statements, such as investors, to assess:

The financial performance of its assets without regard to financing methods, capital structure or historical cost basis;
The ability of its assets to generate cash sufficient to pay interest on our indebtedness; and
Its operating performance and return on invested capital as compared to those of other companies in the well servicing industry, without regard to financing methods and capital structure.

EBITDA has limitations as an analytical tool and should not be considered an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income and operating income and these measures may vary among other companies. Limitations to using EBITDA as an analytical tool include:

EBITDA does not reflect its current or future requirements for capital expenditures or capital commitments;
EBITDA does not reflect changes in, or cash requirements necessary to service interest or principal payments on, its debt;
EBITDA does not reflect income taxes;
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and
Other companies in its industry may calculate EBITDA differently than Epic does, limiting its usefulness as a comparative measure.

The following table presents a reconciliation of net income to EBITDA, which is the most comparable GAAP performance measure, for each of the periods indicated:

	Three months
	Ended March 31,
	(Unaudited)
Reconciliation of Net Income to EBITDA:	2010	2009
Net Loss	$ (5,635)	$ (1,020)
Interest expense	1,261	2,083
Depreciation and amortization	562	1,122
Impairment charges	4,033	-
Income taxes	(1,351)	-
EBITDA	$ (1,130)	$ 2,185
-Financials to Follow-

EPIC ENERGY RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
	March 31,	December 31,
	2010	2009
ASSETS	(unaudited)
Current Assets
Cash and cash equivalents	$ 510	$ 153
Accounts receivable:
Billed, net of allowance of $158 and $185, respectively	3,634	6,348
Unbilled	679	760
Prepaid expenses and other current assets	475	407
Total current assets	5,298	7,668
Property and equipment, net	2,132	2,231
Other assets	32	39
Debt issuance costs, net of accumulated amortization of $591 and $481, respectively	1,011	1,116
Goodwill	8,919	8,919
Other intangible assets, net	4,561	8,906
Total assets	$ 21,953	$ 28,879
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$ 3,163	$ 2,506
Accrued liabilities	2,679	3,753
Deferred revenue	1,507	2,593
Customer deposits	367	949
Current portion of long term debt	3,207	7,416
Total current liabilities	10,923	17,217
Long-term debt	9,774	4,561
Derivative liability	2,756	1,965
Deferred tax liability	-	1,351
Total liabilities	23,453	25,094
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value: 10,000,000 authorized, no shares issued and outstanding	-	-
Common stock, no par value: 100,000,000 authorized; 45,413,734 and 44,105,781 shares issued and outstanding, respectively	33,646	33,639
Additional paid-in capital	2,267	1,924
Accumulated deficit	(37,413)	(31,778)
Total stockholders' equity (deficit)	(1,500)	3,785
Total liabilities and stockholders' equity (deficit)	$ 21,953	$ 28,879

EPIC ENERGY RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share data and per share data)
	Three months ended March 31,
	2010	2009
REVENUES
Consulting fees	$ 4,068	$ 7,774
Reimbursed expenses	1,950	1,240
Total revenues	6,018	9,014
OPERATING EXPENSES
Reimbursed expenses	1,260	1,044
Compensation and benefits	3,808	5,248
General and administrative	1,203	842
Professional and subcontracted services	759	1,221
Occupancy, communication and other	277	312
Depreciation and amortization	562	1,122
Impairment of intangible assets	4,033	-
Total operating expenses	11,902	9,789
Loss from operations	(5,884)	(775)
OTHER INCOME (EXPENSE)
Derivative loss	(791)	(205)
Interest and other income, net	950	95
Interest expense	(1,261)	(2,083)
Total other expense, net	(1,102)	(2,193)
Loss from continuing operations before taxes	(6,986)	(2,968)
Income tax benefit	1,351	-
Loss from continuing operations	(5,635)	(2,968)
DISCONTINUED OPERATIONS
Loss from operations of oil and gas segment	-	(162)
Gain on sale of oil and gas properties	-	2,110
Income from discontinued operations	-	1,948
Net Loss	$ (5,635)	$ (1,020)

Loss per common share - basic and diluted:
Loss from continuing operations	$ (0.13)	$ (0.06)
Income from discontinued operations	-	0.04
Net Loss	$ (0.13)	$ (0.02)

Weighted average common shares outstanding – basic and diluted	44,828,402	43,969,854

EPIC ENERGY RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
	Three months ended March 31,
	2010	2009
OPERATING ACTIVITIES:
Net loss	$ (5,635)	$ (1,020)
Adjustments to reconcile net loss to net cash used in operating activities:
Income from discontinued operations	-	(1,948)
Depreciation and amortization	562	1,122
Allowance for doubtful accounts	(8)	(22)
Amortization of debt discount and debt issuance costs	793	1,499
Stock-based compensation expense	349	292
Loss on sale of accounts receivable	36	-
Loss on sale of property and equipment	1	83
Impairment of intangible assets	4,033	-
Derivative loss	791	205
Deferred taxes	(1,351)	-
Gain on early extinguishment of debt	-	(94)
Changes in operating assets and liabilities:
Accounts receivable	706	(3,144)
Prepaid expenses and other current assets	(69)	(36)
Other non-current assets	7	(8)
Accounts payable	657	(1,477)
Accrued liabilities	(1,074)	(1,312)
Customer deposits	(582)	(117)
Deferred revenue	(1,086)	5,624
Net cash used in operating activities	(1,870)	(353)
INVESTING ACTIVITIES:
Purchases of property and equipment	(151)	(94)
Proceeds from sale of property and equipment	1	53
Net cash used in investing activities	(150)	(41)
FINANCING ACTIVITIES:
Payments on debt	(184)	(3,198)
Proceeds from debt	500	-
Proceeds from sale of accounts receivable	2,061	-
Net cash provided by (used in) financing activities	2,377	(3,198)
DISCONTINUED OPERATIONS:
Net cash used in discontinued operations	-	(9)
Net cash used in discontinued operations	-	(9)
Net increase (decrease) in Cash and Cash Equivalents	357	(3,601)
Cash and Cash Equivalents, Beginning of period	153	4,785
Cash and Cash Equivalents, End of period	$ 510	$ 1,184

SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for Interest	$ 22	$ 1,217
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Settlement of obligations through sale of oil and gas properties	$ -	$ 4,225
Cumulative net effect of change in accounting principle	$ -	$ 748