SOURCE: Aveda Transportation and Energy Services

Aveda Transportation and Energy Services

November 28, 2014 16:19 ET

Aveda Transportation and Energy Services Announces Record Revenue for the Third Quarter of 2014

CALGARY, AB--(Marketwired - November 28, 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 solid revenue and Adjusted EBITDA1 for the three months ended September 30, 2014.

2014 Third Quarter Business Highlights

  • Revenue for the three months ended September 30, 2014 grew by $19.1 million to $42.5 million, compared with revenue of $23.4 million for the same period in 2013. US revenue increased by 101.0% and Canadian revenue increased by 26.4% which resulted in an overall revenue increase of 81.8%;
  • Generated Adjusted EBITDA1 for the quarter ended September 30, 2014 of $5.2 million, an increase of $0.7 million or 15.3% compared with Adjusted EBITDA1 of $4.5 million for the same period in 2013. Excluding the impact of non-steady state items, Adjusted EBITDA1 increased by 102.2% to $7.2 million versus $3.6 million in the same period of 2013;
  • The Company completed the acquisition of Precision Drilling Corporation's ("Precision") US rig moving assets on July 1, 2014 for total consideration of US $24.0 million;
  • The Company hired approximately 150 additional employees during the quarter ended September 30, 2014 due to the acquisition of Precision's US rig moving assets and to fill other vacant positions including the expansion into Oklahoma;
  • The Company opened a new branch in Cherokee, Oklahoma during the quarter, as the result of an agreement with a new customer operating in the Mississippian Basin in Oklahoma and Kansas to provide a minimum threshold of monthly rig moves for a one year period;
  • Deployed rig moving assets acquired from Precision to existing Aveda branches and the newly opened Oklahoma branch; and
  • Generated loss for the three months ended September 30, 2014 of $0.4 million, compared to $2.7 million net income for the same period in 2013. Loss per share was $0.02 compared to earnings per share of $0.27 in the comparative period.

2014 First Three Quarters' Business Highlights

  • Revenue for the nine months ended September 30, 2014 grew by $43.1 million to $110.0 million, compared with revenue of $66.9 million for the same period in 2013. US revenue increased by 87.9% and Canadian revenue increased by 13.7% which resulted in an overall revenue increase of 64.5%. Approximately 80% of the Company's revenue now comes from the United States;
  • Generated Adjusted EBITDA1 for the nine months ended September 30, 2014 of $16.2 million, an increase of $4.2 million compared with Adjusted EBITDA1 of $12.0 million for the same period in 2013, an increase of 35.1% year over year. Excluding the impact of non-steady state items, Adjusted EBITDA1 increased by 80.7% to $18.7 million versus $10.3 million in the same period of 2013;
  • Expanded equipment base by acquiring $34.6 million of additional equipment in the first nine months of 2014, including the acquisition of Precision's US rig moving assets as discussed above;
  • On January 31, 2014, completed the acquisition of the operating assets of Williston, North Dakota based M&K Hotshot Trucking, Inc. and M&K Rig Service, Inc. (collectively "M&K") (Section 17);
  • In connection with the completion of M&K acquisition, in December 2013 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. Concurrent with the closing of the M&K acquisition, all Subscription Receipts automatically converted into 6.4 million common shares of the Company;
  • The Company increased its senior secured credit facility from $75.0 million to $125.0 million; and
  • Generated net income for the nine months ended September 30, 2014 of $1.8 million, compared to $4.8 million of net income for the same period in 2013. Earnings per share were $0.10 compared to earnings per share of $0.48 in the comparative period.

"We are pleased with the continued strength of our top line growth. Our year over year quarterly revenue increased 17 times in the prior 18 quarters. Similarly, we had 8 consecutive quarters of EBITDA increases," said Kevin Roycraft, President and Chief Executive Officer of Aveda. "We are continuing to execute on our organic and acquisition based growth strategies. Our rapid growth has brought certain near-term challenges that we are currently working to expeditiously rectify. We are already seeing improved results as we work through these challenges. I am excited and confident of Aveda's bright future."

The Company will host its third quarter fiscal 2014 results conference call on Monday, December 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/1446563/1608659.

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

1 See the Company's September 30, 2014 Management's Discussion and Analysis Section 8: Non-IFRS Measure

Financial Overview

(in thousands, except per share and ratio amounts)             
                          
   Nine Months Ended September 30, 2014   Nine Months Ended September 30, 2013   % Change 2013 - 2014   Three Months Ended September 30, 2014   Three Months Ended September 30, 2013   % Change 2013 - 2014  
Revenue  110,007   66,871   64.5 % 42,497   23,376   81.8 %
Gross profit4  18,889   14,002   34.9 % 5,292   5,166   2.4 %
Gross margin  17.2 % 20.9 % N/A   12.5 % 22.1 % N/A  
Gross profit4 excluding depreciation and amortization  29,941   19,875   50.6 % 10,163   7,112   42.9 %
Gross margin excluding depreciation and amortization  27.2 % 29.7 % N/A   23.9 % 30.4 % N/A  
Adjusted EBITDA1  16,198   11,987   35.1 % 5,213   4,520   15.3 %
Adjusted EBITDA1 as a percentage of revenue  14.7 % 17.9 % N/A   12.3 % 19.3 % N/A  
Net income (loss)  1,812   4,812   -62.3 % (398 ) 2,689   -114.8 %
Net income (loss) as a percentage of revenue  1.6 % 7.2 % N/A   -0.9 % 11.5 % N/A  
Adjusted EBITDA1 per share  0.85   1.20   -29.2 % 0.26   0.45   -42.2 %
Earnings per share - basic  0.10   0.48   -79.2 % (0.02 ) 0.27   -107.4 %
Earnings per share - diluted  0.09   0.45   -80.0 % (0.02 ) 0.25   -108.0 %
Current ratio2  1.63   2.16   -24.5 % 1.63   2.16   -24.5 %
Debt to equity ratio3  0.86   0.81   6.2 % 0.86   0.81   6.2 %
                          
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 Gross profit is 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 level of drilling activity in the WCSB and US.

In recent history, total drilling activity in the WCSB and US has been negatively impacted due to, in part, lower average 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 which has resulted in oil focused regions, such as those surrounding Aveda's Williston, Pleasanton, Midland and Cherokee branches, to experience robust rig counts. In the third quarter of 2014, the average West Texas Intermediate ("WTI") spot price was approximately $98 per barrel, compared to $106 per barrel during the same period of 2013(1). Despite the year over year decline, oil prices were still considered fairly strong during the quarter. However, recently, the WTI has declined significantly hitting multi-years low. This decline has resulted in major financial institutions updating their forecasts for 2015, and estimates have varied significantly. CIBC's Institutional Equity Research estimates that WTI will average $90 in 2015(2). This compared to Goldman Sachs who estimates that WTI prices will drop to as low as $70 by spring of 2015. Goldman Sachs states that the recent boom in oil production from shale resources in the US is largely responsible for their bearish outlook(3). The significant range in estimates suggests that, at this time, future demand for Aveda's services is hard to predict. However, the Company has started the fourth quarter of 2014 at record pace, having achieved $16.1 million of revenue in October.

The US remains very active with significant opportunities for expansion. According to the Baker Hughes Rig Count4, drilling activity in the Permian, Eagleford, Bakken and Oklahoma regions remain close to the highest levels experienced in the last ten years. The consistently high activity levels have allowed Aveda to grow significantly in these areas. Both the Midland, TX and Pleasanton, TX branches continue to experience increases in activity as they become established providers in their respective basins (Permian and Eagleford). Aveda's most recent organic expansion into Oklahoma, driven by a "minimum revenue" agreement with a major producer in the region, began operating in the third quarter. Early performance from the terminal has been strong. Aveda believes there is significant opportunity to expand its presence in the active Oklahoma market which, as of October 17th 2014, has over 200 active rigs4.

The Company plans to invest additional $1.0 million in capital expenditure for the remainder of 2014, and currently projects to invest $3.0 million to $5.0 million in maintenance capital expenditure in 2015. The Company may revisit its 2015 capital expenditures once there is greater clarity on the stabilization of WTI prices and the impact on drilling activity level. 

Overall, 2014 is expected to finish strong for Aveda as US drilling activity remains stable and Canadian drilling activity increases into the colder months. Demand in 2015, however, remains uncertain and will largely be driven by commodity prices which have experienced significant volatility recently.

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, Williston, ND and Cherokee, OK. 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, 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.

This news release should be read in conjunction with the Company's (i) September 30, 2014 unaudited condensed interim financial statements, and (ii) September 30, 2014 Management's Discussion and Analysis which are available at www.sedar.com and on the Company's website at www.avedaenergy.com.

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.

1 U.S. Energy Information Administration, accessed on October 20, 2014, at http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rwtc&f=d


2 "Oilfield Services Sector Update and Q3/2014 Earnings Preview", CIBC Institutional Equity Research, Jon Morrison and Ashley Connolly, October 23, 2014


3 http://www.cbc.ca/news/business/oil-price-will-fall-to-70-a-barrel-in-2015-goldman-sachs-says-1.2814041


4 Baker Hughes Rig Count, accessed on October 20, 2014, at http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-reportsother

Contact Information

  • For more information, please contact:
    Bharat Mahajan, CA
    Vice President, Finance and Chief Financial Officer
    (403) 264-5769
    bharat.mahajan@avedaenergy.com