Aveda Transportation and Energy Services Inc. ("Aveda" or the "Company") (TSX
VENTURE:AVE), a leading provider of oilfield hauling services and equipment
rentals to the energy industry, today announced record results for the three and
twelve months ended December 31, 2013.
2013 BUSINESS HIGHLIGHTS
-- Revenue for the twelve months ended December 31, 2013 grew by
approximately $5.4 million to $88.7 million compared with revenue of
$83.3 million for the same period in 2012, US revenue increased by 29.8%
which offset a 24.3% decline in Canadian revenue resulted in overall
revenue increase of 6.4%;
-- Generated net income for the twelve months ended December 31, 2013 of
$5.3 million, as compared to net loss of $1.3 million for the same
period in 2012;
-- Generated Adjusted EBITDA(1) for the twelve months ended December 31,
2013 of $15.0 million after incurring $0.7 in acquisition expenses, an
increase of $5.2 million compared with Adjusted EBITDA(1) of $9.8
million for the same period in 2012. Excluding acquisition expenses,
Adjusted EBITDA(1) would have been $15.7 million;
-- Expanded equipment base by acquiring $6.3 million ($4.6 million net of
disposals) of additional equipment and leaseholds in the year 2013,
including the addition of two cranes and invested $0.5 million in the
Company's new ERP system;
-- Generated net cash provided by operating activities for the year ended
December 31, 2013 of $12.5 million, an increase of $4.2 million compared
to $8.3 million for the same period in 2012;
-- Repaid loans and borrowings of $2.3 million in the year ended December
31, 2013 from internally generated cash flow;
-- Relocated the Company's Pennsylvania branch from New Columbia to
Williamsport, Pennsylvania;
-- Commenced operation of a new satellite branch in Buckhannon, West
Virginia;
-- Converted $4.7 million of convertible debenture into 1,850,980 common
shares of the Company at a price of $2.55 per share;
-- Acquired all outstanding shares of Lon Dan Enterprises Ltd., which
carries on business as Belair Rentals for an initial purchase price of
$4.0 million and contingent consideration currently estimated $1.5
million if the acquired business achieves certain financial targets. As
a result of the acquisition the Company established operations in Edson,
AB, thus enabling the Company to better serve our clients in the Edson
region and improve the utilization of the Company's existing rental
equipment;
-- Relocated the Company's US head office from Mineral Wells, TX to
Houston, TX to be closer and better serve the Company's US clients;
-- Signed an asset purchase agreement to acquire the operating assets of
Williston, North Dakota based
M&K Hotshot & Trucking, Inc. and M&K Rig Service, Inc. (collectively
"M&K"). The M&K acquisition was completed on January 31, 2014;
Note:
(1) See page 3 of this news release for definition of Adjusted EBITDA and Debt
to EBITDA.
-- In connection with the M&K acquisition, the Company closed a $23.0
million bought deal private placement offering of 6.4 million
Subscription Receipts of the Company (the "Subscription Receipts") at a
price of $3.60 per Subscription Receipt. Subsequent to the year end,
concurrent with the closing of the M&K acquisition, all Subscription
Receipts automatically converted into 6.4 million common shares of the
Company; and
-- In connection with the M&K acquisition, the Company entered into an
agreement with its senior credit facility holder which the availability
under its current operating facility (i) be increased to $75.0 million
effective December 31, 2013; (ii) be extended to January 1, 2018; (iii)
have the interest rate decreased by 50 basis points as long as Undrawn
Availability (as defined in the Facility agreement) is greater than
$10.0 million; and (iv) the removal of all financial covenants as long
as the Undrawn Availability is greater than $15.0 million.
"The Aveda team continues to execute on our growth strategy, and at the same
time consistently improve our operations to better serve our customers," said
Kevin Roycraft, President and Chief Executive Officer of Aveda. "I thank our
team for all their efforts and look forward to many more successes."
The Company is pleased to announce that, subject to the receipt of TSX Venture
Exchange approval, it has engaged Transcend Resource Group. ("Transcend"), a
Vancouver, British Columbia based investor relations firm, to conduct certain
investor relations activities on behalf of the Company, including the
publication and dissemination of articles regarding the Company. Pursuant to a
service agreement entered into between the Company and Transcend, Transcend will
provide investor relations activities on behalf of the Company for a three
month-term. Pursuant to the agreement, Transcend will receive a monthly fee of
$2,500. Prior to the entering into of the agreement outlined above, Transcend
had no direct or indirect interest in the Company or its securities.
The Company also announces that Kris Miks has resigned as the Company's
Corporate Secretary. The Company thanks Mr. Miks for his contributions to our
successes over the years.
The Company will host its fourth quarter fiscal 2013 results conference call on
Thursday, May 1st, 2014 at 9:00 a.m. Eastern Time (ET). Executive Chairman David
Werklund, President and CEO Kevin Roycraft and Vice-President, Finance and CFO
Bharat Mahajan will discuss Aveda's financial results for the quarter and then
take questions from securities analysts.
To access the conference call by telephone, dial (647) 427-7450 or
1-888-231-8191. A live audio webcast of the conference call will be available at
http://www.newswire.ca/en/webcast/detail/1337339/1478257.
The conference call webcast will be archived and available at
http://www.avedaenergy.com/investors/Conference-Calls/default.aspx until June
30, 2014.
The Company's consolidated financial statements and Management's Discussion and
Analysis are available on the Company's website at www.avedaenergy.com or the
SEDAR website at www.sedar.com.
Financial Overview
(in thousands, except per share and ratio amounts)
Twelve Twelve Three Three
Months Months Months Months
Ended Ended % Change Ended Ended % Change
December December 2012 - December December 2012 -
31, 2013 31, 2012 2013 31, 2013 31, 2012 2013
------------------------------------------------------
Revenue 88,664 83,331 6.4% 21,793 23,015 -5.3%
Gross profit(5) 18,597 13,745 35.3% 4,595 3,149 45.9%
Gross margin 21.0% 16.5% N/A 21.1% 13.7% N/A
Gross profit(5)
excluding
depreciation and
amortization 26,472 20,397 29.8% 6,596 5,194 27.0%
Gross margin excluding
depreciation and
amortization 29.9% 24.5% N/A 30.3% 22.6% N/A
Adjusted EBITDA(1) 15,039 9,761 54.1% 3,052 2,553 19.5%
Adjusted EBITDA(1) as
a percentage of
revenue 17.0% 11.7% N/A 14.0% 11.1% N/A
Net income (loss) 5,299 (1,278) 514.6% 487 (517) 194.2%
Net income (loss) as a
percentage of revenue 6.0% -1.5% N/A 2.2% -2.2% N/A
Adjusted EBITDA(1) per
share 1.51 1.11 36.0% 0.30 0.26 15.4%
Earnings per share -
basic 0.53 (0.15) 453.3% 0.05 (0.05) 200.0%
Earnings per share -
diluted 0.51 (0.15) 440.0% 0.05 (0.05) 200.0%
Current ratio(2) 2.17 2.10 3.6% 2.17 2.10 3.6%
Debt to equity
ratio(3) 0.70 1.36 -48.5% 0.70 1.36 -48.5%
Debt to EBITDA
ratio(3, 4) 1.67 3.38 -50.6% 1.67 3.38 -50.6%
Notes:
(1) This News Release contains the term Adjusted EBITDA. Adjusted EBITDA as
presented does not have any standardized meaning prescribed by international
financial reporting standards (IFRS) and therefore it may not be comparable with
the calculation of similar measures for other entities. Management uses Adjusted
EBITDA to analyze the operating performance of the business. Adjusted EBITDA as
presented is not intended to represent cash provided by operating activities,
net earnings or other measures of financial performance calculated in accordance
with IFRS. It is defined as earnings before interest, taxes, depreciation and
amortization excluding foreign exchange gains or losses which are primarily
related to the US dollar activities of the Company and can vary significantly
depending on exchange rate fluctuations, which are beyond the control of the
Company, and write downs of intangible assets, goodwill impairment, financing
costs, gains or losses on disposal of assets, stock based compensation, fees and
expenses on settlement of debt and losses on extinguishment of debt.
(2) Current ratio calculated as current assets divided by current liabilities.
(3) Debt includes loans and borrowings as per their carrying amounts on the
balance sheet.
(4) EBITDA used is Adjusted EBITDA for the trailing twelve months.
(5) Gross profit calculated as revenue less direct operating expense.
Outlook
Aveda earns revenue primarily by providing specialized transportation services
to companies engaged in the exploration, development and production of petroleum
resources. As a result, demand for Aveda's transportation services are generally
linked to the economic conditions of the energy industry and the general level
of drilling activity in the exploration, development and production of petroleum
resources in Western Canada and United States.
In recent history, total drilling activity in the WCSB and US has been
negatively impacted due to, in part, lower natural gas prices. This has largely
been the result of increased supply driven by the fast development of shale gas
resources in the US. Countering the decline in natural gas drilling has been a
relatively strong price for oil. The average West Texas Intermediate ("WTI")
spot price during April 2014 was approximately $100, just below the average
monthly high of $104 during 2013(1). This consistently strong WTI price has
resulted in oil-focused regions to experience robust rig counts, such as those
surrounding Aveda's Pleasanton and Midland. During April 2014 the average number
of rigs within approximately a 100 mile radius of Pleasanton and Midland were
209 and 360. Of that rig count, nearly all were drilling for oil (89% in
Pleasanton and 99% in Midland)(2).
In the WCSB, at the end December 2013, rig counts were approximately 10% higher
than the count at the same time last year(3). Despite this increase, overall
counts remain well below 2011 levels due to, in part, on-going export capacity
bottlenecks and limited capital expenditures, particularly in natural gas plays.
Although future natural gas activity remains uncertain in Canada, TD Canada
Trust(4) ("TD") recently identified that based on forward-looking shipping
commitments, the demand for Canadian natural gas in 2014 may be the strongest in
5 years. TD also expects, over the shorter term, prices and demand will remain
relatively strong due to the colder than expected winter (inventories in the
U.S. are more than 30% below the five year average). TD's relatively positive
outlook may be further reinforced by Pembina Pipeline Corp.'s ("Pembina")
announcement that they are proceeding with their phase III expansion, which will
result in a new 270 km pipeline from Fox Creek, Alberta to Edmonton, Alberta.
This expansion is the largest in Pembina's history and will have an ultimate
capacity of 500,000 barrels per day. This expansion is under-pinned by long-term
contracts with 30 customers and is expected to be in service in late 2016 and
mid-2017(5). In addition, many industry analysts are citing Canadian Natural
Resources Ltd.'s $3.13 Billion dollar acquisition of Devon Energy Corp.'s
Canadian conventional business, which was the largest acquisition by a Canadian
energy company since Suncor Energy Inc. acquired Petro Canada in 2009, may be
the start of an active merger and acquisition year in Western Canada. Adam
Waterous, Vice Chairman at Scotia Waterous, stated that recently there has been
"ferocious demand on the part of buyers" (both foreign and Canadian)(6).
Due to the more optimistic outlook in the Canadian oil and gas market, Aveda
anticipates Canadian revenue in 2014 to exceed 2013.
(1) U.S. Energy Information Administration, accessed on March 4, 2012 at
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rwtc&f=d
(2) Baker Hughes North American Rig Count, accessed on March 4, 2014 at
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother
(3) Canadian Association of Oilwell Drilling Contractors, accessed on March 4,
2014 at http://www.caodc.ca/dr-month
(4) TD Economics, "Finally Some Good News for Canadian Natural Gas Producers",
http://www.td.com/document/PDF/economics/special/Canadian_Natural_Gas_Producers.pdf
(5) News Wire, "Pembina Pipeline Corporation to Proceed with $2 Billion Phase
III Expansion of its Pipeline System",
http://www.newswire.ca/en/story/1280621/pembina-pipeline-corporation-to-proceed-with-2-billion-phase-iii-expansion-of-its-pipeline-system
(6) Financial Post, "Canadian Natural's $3.13B Deal for Devon Energy Marks
Comeback for Canadian Energy Sector",
http://business.financialpost.com/2014/02/19/canadian-naturals-3-13b-deal-for-devon-energy-marks-comeback-for-canadian-energy-sector/?__lsa=a438-bae8
Although there is no shortage of future opportunities in Canada, it appears that
at this time, opportunities for expansion and growth are strongest in the US.
According to Baker Hughes, key regions where Aveda has terminals, including the
Eagle Ford, Permian and Bakken, have rig counts that remain close to all-time
highs(7). The high rig count is despite drillers having shifted away from using
multiple, smaller rigs with fewer, larger rigs which are more efficient. Recent
analysis by the U.S. Energy Information Administration ("EIA") found that 67% of
all oil production growth from the six largest US plays were coming from the
Eagle Ford and Bakken(8). In contrast, other regions in which Aveda competes,
such as the Barnett and Marcellus, have relatively limited, or declining
activity levels. The limited market size has been a challenge; however, to date,
Aveda has remained competitive in these regions due to, in part, strong client
relationships. Aveda continues to actively explore new opportunities/strategies
to help improve margins and increase revenue in these regions. Aveda's newest
satellite branch in Buckhannon, WV, which services clients in the Utica region,
continues to gain traction; however, is experiencing growth at a rate slower
than initially anticipated. As such, the Company will continue to monitor this
branch's performance and evaluate several alternatives before determining
whether or not to continue operations from this location.
Overall, Aveda expects the US market to remain strong in 2014. As described
above, activity in the Midland and Pleasanton areas especially have the
potential to experience significant growth. Both terminals, which were opened in
2012, started to realize full potential in mid to late 2013 which Aveda expects
to continue through 2014.
Currently, the Company expects to spend $12 - $15 million on capital
expenditures during 2014. Approximately $3 - $5 million is expected to be
maintenance related and the balance for growth. Aveda may also expand its
geographic footprint in 2014. This however is dependent on market conditions. If
conditions change, the expected capital expenditure will be adjusted
accordingly.
About Aveda Transportation and Energy Services
Aveda provides specialized transportation services and equipment required for
the exploration, development and production of petroleum resources in the
Western Canadian Sedimentary Basin and in the United States of America
principally in and around the states of Texas, Pennsylvania and North Dakota.
Transportation services include both the equipment necessary to move the load as
well as a trained, professional driver capable of securing, moving and
manipulating the load at its origin and destination. Aveda's rental operations
include the rental of well-sites, tanks, mats, pickers, light towers and other
equipment necessary for oilfield operations.
Aveda was incorporated in 1994 as a private company to serve the oil and gas
industry. In the spring of 2006 the Company went public on the TSX Venture
Exchange. Aveda has major operations in Calgary, AB, Slave Lake, AB, Leduc, AB,
Sylvan Lake, AB, Edson, AB, Mineral Wells, TX, Pleasanton, TX, Midland, TX,
Williamsport, PA, Buckhannon, WV and Williston, ND. Aveda is publicly traded on
the TSX Venture Exchange under the symbol AVE. For more information on Aveda
please visit www.avedaenergy.com.
(7) Baker Hughes North American Rig Count, accessed on March 4, 2014 at
http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother
(8) U.S. Energy Information Administration, "Outlook for U.S. Shale Oil and
Gas", http://www.eia.gov/pressroom/presentations/sieminski_01042014.pdf
This News Release contains certain forward-looking statements and
forward-looking information (collectively referred to herein as "forward-looking
statements") within the meaning of applicable Canadian securities laws. All
statements other than statements of present or historical fact are
forward-looking statements. Forward-looking statements are often, but not
always, identified by the use of words such as "anticipate", "achieve", "could",
"believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate",
"outlook", "expect", "may", "will", "project", "should" or similar words,
including negatives thereof, suggesting future outcomes. In particular, this
News Release contains forward-looking statements relating to: demand for the
Company's services and general industry activity level; the Company's growth
opportunities; and expectation to maintain revenue and equipment utilization.
Aveda believes the expectations reflected in such forward-looking statements are
reasonable as of the date hereof but no assurance can be given that these
expectations will prove to be correct and such forward-looking statements should
not be unduly relied upon.
Various material factors and assumptions are typically applied in drawing
conclusions or making the forecasts or projections set out in forward-looking
statements. Those material factors and assumptions are based on information
currently available to Aveda, including information obtained from third party
industry analysts and other third party sources. In some instances, material
assumptions and material factors are presented elsewhere in this News Release in
connection with the forward-looking statements. Readers are cautioned that the
following list of material factors and assumptions is not exhaustive. Specific
material factors and assumptions include, but are not limited to:
-- the performance of Aveda's businesses, including current business and
economic trends;
-- oil and natural gas commodity prices and production levels;
-- the effect of the rebranding on Aveda's businesses;
-- capital expenditure programs and other expenditures by Aveda and its
customers:
-- the ability of Aveda to retain and hire qualified personnel;
-- the ability of Aveda to obtain parts, consumables, equipment,
technology, and supplies in a timely manner to carry out its activities;
-- the ability of Aveda to maintain good working relationships with key
suppliers;
-- the ability of Aveda to market its services successfully to existing and
new customers;
-- the ability of Aveda to obtain timely financing on acceptable terms;
-- currency exchange and interest rates;
-- risks associated with foreign operations;
-- changes under governmental regulatory regimes and tax, environmental and
other laws in Canada and the United States; and
-- a stable competitive environment.
Forward-looking statements are not a guarantee of future performance and involve
a number of risks and uncertainties, some of which are described herein. Such
forward-looking statements necessarily involve known and unknown risks and
uncertainties, which may cause Aveda's actual performance and financial results
in future periods to differ materially from any projections of future
performance or results expressed or implied by such forward-looking statements.
These risks and uncertainties include, but are not limited to, the risks
identified in Aveda's annual information form and management discussion and
analysis for the year ended December 31, 2013 (the "MD&A"). Any forward-looking
statements are made as of the date hereof and, except as required by law, Aveda
assumes no obligation to publicly update or revise such statements to reflect
new information, subsequent or otherwise.
This News Release contains the terms EBITDA and Adjusted EBITDA which are
defined in the MD&A. EBITDA and Adjusted EBITDA as presented do not have any
standardized meaning prescribed by international financial reporting standards
(IFRS) and therefore may not be comparable with the calculation of similar
measures for other entities. Management uses Adjusted EBITDA to analyze the
operating performance of the business. Adjusted EBITDA as presented is not
intended to represent cash provided by operating activities, net earnings or
other measures of financial performance calculated in accordance with IFRS.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term
is defined in the policies of the TSX Venture Exchange) accepts responsibility
for the adequacy or accuracy of this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Aveda Transportation and Energy Services Inc.
Bharat Mahajan, CA
Vice President, Finance and Chief Financial
(403) 264-5769
bharat.mahajan@avedaenergy.com
www.avedaenergy.com
Aveda Transportation and Energy (TSXV:AVE)
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