Aveda Transportation and Energy Services
TSX VENTURE : AVE

Aveda Transportation and Energy Services

November 04, 2013 16:10 ET

Aveda Transportation and Energy Services Announces Record Revenue, EBITDA and Net Income for the Third Quarter of 2013

CALGARY, ALBERTA--(Marketwired - Nov. 4, 2013) - 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 revenue, Adjusted EBITDA1 and net income for the nine and three months ended September 30, 2013.

2013 Third Quarter Business Highlights

  • Revenue for the three months ended September 30, 2013 grew by almost $3.5 million to $23.4 million, compared with revenue of $19.9 million for the same period in 2012;
  • Reported 14 consecutive quarters of record revenue growth as compared to the same period of the prior year. US revenues grew by 39.4% to $17.4 million compared to $12.5 million in the third quarter of 2012;
  • Generated net income for the three months ended September 30, 2013 of $2.7 million, an increase of $3.1 million compared to a $0.4 million loss for the same period in 2012. Net income per share increased to $0.27 compared to a loss per share of $0.04 in the comparative period;
  • Increased Adjusted EBITDA1 by 57.9% to $4.5 million in the third quarter of 2013 as compared to $2.9 million in the same period of 2012;
  • Received a $2.3 million (net of fees) refund for Scientific Research and Investment Tax Credits related to Aveda's predecessor company from 1993 - 1999;
  • Disposed of redundant capital assets for proceeds of $1.3 million recording a gain from disposal of assets of $0.6 million;
  • The Company's solid EBITDA results and positive cash flow generation reduced bank debt by $1.7 million during the three months ended September 30, 2013;
  • Commenced operation of a new satellite branch in Buckhannon, West Virginia; and
  • The Company recently announced that it has gained the unilateral right to convert $4.7 million of convertible debentures to common shares of the Company. If the debentures had been converted at September 30, 2013, the Company's Debt to EBITDA1 ratio would have improved from 1.65 to 1.33.

2013 First Three Quarters' Business Highlights

  • Revenue for the nine months ended September 30, 2013 grew by $6.6 million to $66.9 million, compared with revenue of $60.3 million for the same period in 2012. Aveda achieved this revenue growth despite an average year-over-year rig count decline of approximately 7% in the areas the Company operates in;
  • Generated net income for the nine months ended September 30, 2013 of $4.8 million, an increase of $5.6 million compared to a $0.8 million loss for the same period in 2012. Net income per share increased to $0.48 compared to a loss per share of $0.09 in the comparative period;
Note:
(1) See the Financial Overview table of this news release for definition of Adjusted EBITDA and Debt to EBITDA.
  • Generated Adjusted EBITDA1 for the nine months ended September 30, 2013 of $12.0 million, an increase of $4.8 million compared with Adjusted EBITDA1 of $7.2 million for the same period in 2012, an increase of 66.3% year over year;
  • Generated net cash provided by operating activities for the nine months ended September 30, 2013 of $10.9 million, an increase of $6.6 million compared to $4.3 million for the same period in 2012;
  • Repaid loans and borrowings of $9.5 million in the nine months ended September 30, 2013 after investing $2.1 million in new capital assets and $0.4 million in the Company's new ERP system; and
  • Relocated the Company's Pennsylvania branch from New Columbia to Williamsport, Pennsylvania.

In addition, to accommodate Aveda's expected growth, the Company will be moving its US Corporate Office from Mineral Wells, TX to Houston TX in the first quarter of 2014. This move will put the Company in close proximity to the headquarters of many current and potential customers.

"The Aveda team has repeatedly demonstrated our ability to execute and deliver solid results every quarter this year," said Kevin Roycraft, President and Chief Executive Officer of Aveda. "I thank our team for their efforts and look forward to continued success."

The Company will host its third quarter fiscal 2013 results conference call on Tuesday, November 5th 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/1249937/1377223.

The conference call webcast will be archived and available at http://www.avedaenergy.com/investors/Conference-Calls/default.aspx until December 31, 2013.

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)
Nine Months Ended September 30, 2013 Nine Months Ended September 30, 2012

% Change 2012 -
2013
Three Months Ended September 30, 2013 Three Months Ended September 30, 2012


% Change 2012 - 2013
Revenue 66,871 60,316 10.9 % 23,376 19,936 17.3 %
Gross profit5 14,002 10,596 32.1 % 5,166 3,492 47.9 %
Gross margin 20.9 % 17.6 % N/A 22.1 % 17.5 % N/A
Gross profit5 excluding depreciation and amortization 19,875 15,203 30.7 % 7,112 5,426 31.1 %
Gross margin excluding depreciation and amortization 29.7 % 25.2 % N/A 30.4 % 27.2 % N/A
Adjusted EBITDA1 11,987 7,208 66.3 % 4,520 2,863 57.9 %
Adjusted EBITDA1 as a percentage of revenue 17.9 % 12.0 % N/A 19.3 % 14.4 % N/A
Net income (loss) 4,812 (761 ) 732.3 % 2,689 (431 ) 723.9 %
Net income (loss) as a percentage of revenue 7.2 % -1.3 % N/A 11.5 % -2.2 % N/A
Adjusted EBITDA1 per share 1.20 0.86 39.5 % 0.45 0.29 55.2 %
Earnings per share - basic 0.48 (0.09 ) 633.3 % 0.27 (0.04 ) 775.0 %
Earnings per share - diluted 0.45 (0.09 ) 600.0 % 0.25 (0.04 ) 725.0 %
Current ratio2 2.16 2.94 -26.5 % 2.16 2.94 -26.5 %
Debt to equity ratio3 0.81 1.52 -46.7 % 0.81 1.52 -46.7 %
Debt to EBITDA ratio3, 4 1.65 3.76 -56.1 % 1.65 3.76 -56.1 %
Adjusted debt to EBITDA ratio6 1.33 N/A N/A 1.33 N/A N/A
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.
(6) Aveda recently announced that it has gained the unilateral right to convert $4.7 million of convertible debentures to common shares of the Company. Management intends to convert these debentures into common shares of Aveda before the end of the year. For the purposes of this calculation, it is assumed that these debentures had been converted to equity on September 30, 2013.

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 United States 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 United States. Countering the decline in natural gas drilling has been a relatively strong price for oil which has resulted in oil-focused regions, such as those surrounding Aveda's Pleasanton and Midland, TX branches, to experience robust rig counts. In the third quarter of 2013, the average West Texas Intermediate spot price was approximately $106 per barrel, compared to $94 per barrel during the first half of 20131.

In Alberta's portion of the WCSB, third quarter rig counts increased approximately 9% relative to the same period in 2012. Despite this increase, overall counts remain below 2011 levels due to, in part, on-going export capacity bottlenecks and limited capital expenditures, particularly in natural gas plays. Instead, many companies with natural gas assets have shifted their focus towards cautious investments in liquids-rich plays, divesting from dry gas assets and reducing overall capital expenditure in expectation of market improvements2.

Although future natural gas activity remains uncertain in Canada, a recent CIBC report3 suggests that several years of declining natural gas production has resulted in a gradual decrease in supply. As a result, in combination with the expectation of increasing demand, they are forecasting higher natural gas prices in 2014 relative to what has been experienced in 2013. CIBC also suggests that recent events in Canada such as British Columbia's efforts to reach an agreement on a tax framework for LNG exports have focused attention on Canada's world class shale gas resources. Increasing confidence in Canada's natural gas market may be illustrated through the recent announcement by Petronas (a Malaysian state-owned oil and gas company) that they intend to invest $36 billion in the building of both a liquid natural gas plant in British Columbia, as well as the pipeline to feed it. If this occurs, it will represent one of the largest direct investments in Canada by any country4.

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 the Baker Hughes Rig Count5, drilling activity in the Eagleford and Permian basins remain close to the highest levels experienced in the last ten years. The slight decline compared to previous years is not expected to represent any significant reduction in Aveda's activity levels in these regions as rig efficiencies have resulted in more frequent rig moves. The consistently high activity levels have allowed Aveda to grow significantly in these areas, with the opening of two new branches (Pleasanton and Midland) in 2012. In contrast, the Barnett basin, which is primarily serviced by the Mineral Wells, TX branch, continues to face significant declines in rig counts. As a result, the Mineral Wells branch continues to work on maximizing revenue and EBITDA by focusing efforts on acquiring new customers in higher activity, liquids-rich areas to the north.

1 U.S. Energy Information Administration, accessed on October 21, 2013, at http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rwtc&f=d

2 http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/encana-puts-brakes-on-liquids-plays/article8656404/

3 http://www.theglobeandmail.com/globe-investor/investment-ideas/research-reports/article14748216.ece/BINARY/NaturalGas.pdf

4 http://www.vancouversun.com/technology/Petronas+potential+investment+pegged+billion/9004488/story.html

5 Baker Hughes Rig Count, accessed on October 21, 2013, at http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother

As with the Barnett basin, the Marcellus, which is serviced by Aveda's Williamsport, PA branch, continues to experience significant decreases in rig count and it is expected that rig counts will continue a slow downward trend in Pennsylvania gas plays. However, despite the declines, overall, the branch continued to maintain a solid revenue stream. Aveda's new satellite branch in Buckhannon, WV, which is managed by Aveda's Williamsport team, began operations at the beginning of the third quarter. The branch is strategically located to service clients in the Utica basin, an area that has experienced significant growth in rig counts over the last two years. However, the branch is experiencing slower than expected growth. The Company will closely monitor this branch's performance and implement action plans for improvement, before evaluating its options on whether it will maintain operations at the current location.

The Company continues to assess the market conditions for its services and allocates resources accordingly. The Company plans to expend approximately $2.5 - $3.0 million on capital expenditures for the remainder of the year. The Company is evaluating the merits of acquiring cranes, instead of relying on third party crane operators. The result of the crane evaluation may result in additional capital expenditure of up to $1.5 million in 2013.

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 and Pennsylvania. 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 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 Mineral Wells, TX, Pleasanton, TX, Midland, TX, Williamsport, PA and Buckhannon, WV. Aveda is publicly traded on the TSX Venture Exchange under the symbol AVE. For more information on Aveda please visit www.avedaenergy.com.

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, 2012 (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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