Aveda Transportation and Energy Services
TSX VENTURE : AVE

Aveda Transportation and Energy Services

April 30, 2014 16:15 ET

Aveda Transportation and Energy Services Announces Record Results for Fiscal Year 2013

CALGARY, ALBERTA--(Marketwired - April 30, 2014) -

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 EBITDA1 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 EBITDA1 of $9.8 million for the same period in 2012. Excluding acquisition expenses, Adjusted EBITDA1 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 profit5 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 profit5 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 EBITDA1 15,039 9,761 54.1 % 3,052 2,553 19.5 %
Adjusted EBITDA1 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 EBITDA1 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 ratio2 2.17 2.10 3.6 % 2.17 2.10 3.6 %
Debt to equity ratio3 0.70 1.36 -48.5 % 0.70 1.36 -48.5 %
Debt to EBITDA ratio3, 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 20131. 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 year3. 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 Trust4 ("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-20175. 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 highs7. 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 Bakken8. 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.

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