SOURCE: Aveda Transportation and Energy Services

Aveda Transportation and Energy Services

April 04, 2016 16:15 ET

Aveda Transportation and Energy Services Announces Results for the Fourth Quarter of 2015

CALGARY, AB--(Marketwired - April 04, 2016) - 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 results for the three and twelve months ended December 31, 2015.

2015 FOURTH QUARTER BUSINESS HIGHLIGHTS

  • As a result of the significant slow-down in drilling activities experienced in the oil and gas sector due to the drastic decline in the price of oil and natural gas, revenue for the three months ended December 31, 2015 decreased by $28.3 million to $17.5 million, compared with revenue of $45.9 million for the same period in 2014. US revenue decreased by 56.2% while Canadian revenue decreased by 82.4% which resulted in an overall revenue decrease of 61.8%;
  • Generated net loss for the three months ended December 31, 2015 of $11.2 million, compared to net income of $0.7 million for the same period in 2014. Loss per share was $0.59 compared to earnings per share of $0.03 in the comparative period;
  • Generated Adjusted EBITDA1 loss for the quarter ended December 31, 2015 of $6.3 million, compared with Adjusted EBITDA1 of $8.3 million for the same period in 2014; and
  • The Company ended the quarter with a net asset value per share6 of $2.97, $6.7 million in working capital with a working capital ratio of 1.71, and undrawn cash availability of $52.2 million on its senior debt facility.

2015 BUSINESS HIGHLIGHTS

  • Revenue for the twelve months ended December 31, 2015 declined by $54.6 million to $101.3 million compared with revenue of $155.9 million for the same period in 2014. US revenue decreased by 26.8% and Canadian revenue decreased by 64.8% which resulted in an overall revenue decrease of 35.0%. Revenue from United States makes up 88.3% of total revenue;
  • Generated net loss for the twelve months ended December 31, 2015 of $26.5 million, compared to net income of $2.5 million for the same period in 2014. Loss per share was $1.38 compared to earnings per share of $0.13 in the comparative period. Items related to the Acquisition (see below) had a positive impact on 2015 pre-tax earnings of approximately $9.7 million (excluding finance fees and interest expenses), and intangible assets and goodwill impairment had a negative impact of $14.4 million. Excluding the above items related to the Acquisition and impairment, the Company would have generated a pre-tax loss of $38.6 million for 2015;
  • Generated Adjusted EBITDA1 loss for the twelve months ended December 31, 2015 of $10.7 million, a decrease of $35.2 million compared with positive Adjusted EBITDA1 of $24.5 million for the same period in 2014;
  • Completed the acquisition (the "Acquisition") of Hodges Trucking Company, L.L.C. ("Hodges"), for total consideration of US$42.0 million, the Company acquired approximately 900 pieces of rig moving and heavy haul equipment. US$15.0 million of the purchase price was financed through the Company's existing senior credit facility, and US$27.0 million was financed by a seller take-back note (the "Note"). The Note is a five-year term debt note with no requirement of early principal payment;
  • Subsequent to the closing of the Acquisition, the Company sold approximately 350 pieces of Hodges' non-oilfield equipment for approximately US$22.0 million; and
  • The Company implemented various cost management initiatives, including wage roll backs, and the elimination of positions across the organization. In addition, the Company closed its branches in Slave Lake, AB, Mineral Wells, TX and also merged its Cherokee, OK branch with its Oklahoma City, OK branch and merged the Heavy Haul and Hotshot branches in Calgary.

"2015 was a challenging year for Aveda and the oilfield services sector as a whole," said Ronnie Witherspoon, President and Chief Executive Officer of Aveda. "The Company has a strong balance sheet and I am confident we will navigate through the current environment to emerge as a leading oilfield transportation services provider."

The Company will host its fourth quarter fiscal 2015 results conference call on Tuesday, April 5th, 2016 at 9:00 a.m. Eastern Time (ET). Executive Chairman, David Werklund, President and CEO Ronnie Witherspoon 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://event.on24.com/r.htm?e=1160304&s=1&k=355B7CD870CE024851FD9F6601559CFC.

The conference call webcast will be archived and available until May 15, 2016 at:

http://www.avedaenergy.com/investor-hub/conference-calls/default.aspx.

The Company's consolidated financial statements and Management's Discussion and Analysis are available on the Company's website at www.avedaenergy.com and the SEDAR website at www.sedar.com.

Financial Overview

    Twelve
Months
Ended
December
31, 2015
  Twelve
Months
Ended
December
31, 2014
  % Change
2014 -
2015
  Three
Months
Ended
December
31, 2015
  Three
Months
Ended
December
31, 2014
  % Change
2014 -
2015
 
Revenue   101,315   155,900   -35.0 % 17,545   45,893   -61.8 %
Gross profit1 (loss)   (13,217 ) 27,223   -148.6 % (8,443 ) 8,334   -201.3 %
Gross margin   -13.0 % 17.5 % N/A   -48.1 % 18.2 % N/A  
Gross profit (loss)excluding depreciation and amortization1   8,339   44,177   -81.1 % (1,276 ) 14,236   -109.0 %
Gross margin excluding depreciation and amortization5   8.2 % 28.3 % N/A   -7.3 % 31.0 % N/A  
Adjusted EBITDA1   (10,710 ) 24,533   -143.7 % (6,271 ) 8,335   -175.2 %
Adjusted EBITDA1 as a percentage of revenue   -10.6 % 15.7 % N/A   -35.7 % 18.2 % N/A  
Net income (loss)   (26,541 ) 2,468   -1175.4 % (11,171 ) 656   1802.9 %
Net income (loss) as a percentage of revenue   -26.2 % 1.6 % N/A   -63.7 % 1.4 % N/A  
Adjusted EBITDA1 per share   (0.56 ) 1.28   -143.8 % (0.33 ) 0.42   -178.6 %
Earnings (loss) per share - basic   (1.38 ) 0.13   -1161.5 % (0.59 ) 0.03   2066.7 %
Earnings (loss) per share - diluted   (1.38 ) 0.13   -1161.5 % (0.59 ) 0.03   2066.7 %
Current ratio2   1.71   1.93   -11.4 % 1.71   1.93   -11.4 %
Debt to equity ratio3   1.26   0.70   80.7 % 1.26   0.70   80.7 %
Debt to Adjusted EBITDA ratio3   NM   2.04   NM   NM   (4.67 ) NM  

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 is generally linked to the economic conditions of the energy industry and the level of drilling activity in the WCSB and US.

2015 was a challenging year for oil and gas companies, particularly those in the services sector. During 2015, rigs operating in regions where Aveda has terminals decreased by approximately 60% (from 1,236 to 507). The rig count has continued to decline at a rapid pace during early 2016 suggesting a "bottom" hasn't yet been reached.

Many industry experts have varying opinions on when oil and natural gas prices will start to rebound; however, the general consensus seems to suggest that the environment will remain challenging through most, if not all, of 2016. In response to the challenging market, during 2015, Aveda took aggressive measures to right-size its costs, including terminal consolidations, elimination of redundant non-revenue generating positions and salary rollbacks. Aveda has made further adjustments during 2016, including further downsizing terminal locations, reducing select hourly wages, and transferring select salary employees to a variable pay structure.

During the fourth quarter of 2015 pricing pressures increased to a level that Aveda believes is unsustainable. In response, Aveda has chosen not to accept jobs unless they are at least able to cover variable costs (at the terminal level, excluding corporate costs). This strategy resulted in a significant decline in revenue for Aveda in late 2015, which has continued through early 2016. In December 2015, Aveda generated revenue of approximately $5.3 million and an Adjusted EBITDA1 loss of approximately $3.2 million. In January 2016, Aveda generated revenue of $4.5 million and an Adjusted EBITDA1 loss of approximately $1.7 million. In February 2016, Aveda generated revenue of approximately $4.2 million and an Adjusted EBITDA1 loss of approximately $1.0 million. As can be seen over the corresponding period from December 2015 to February 2016, Aveda's revenue decreased month-over-month due to the Company being selective on the jobs its accepts. Along with the decrease in revenue, the Company's Adjusted EBITDA1 loss also decreased month-over-month. 

Overall, Aveda expects 2016 to be operationally challenging. The Company expects to generate an Adjusted EBITDA1 loss during the first half of 2016. The Company does not have much visibility into the second half of the year. At December 31, 2015, Aveda had a net asset value6 of $2.97 per share and $52.2 million of undrawn cash availability on its senior debt facility. The Company is seeing competitors exit the market and it appears that pricing is near the bottom. Based on current cash availability on Aveda's senior debt facility, Aveda has the financial capacity to meet its obligations and manage through this downturn.

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, Oklahoma 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, Leduc, AB, Sylvan Lake, AB, Edson, AB, Pleasanton, TX, Midland, TX, Marshall, TX, Williamsport, PA, Bridgeport, WV, Williston, ND, and Oklahoma City, 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 expectations regarding the Company's revenue, EBITDA 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.

The forward-looking statements regarding Aveda's potential revenue and EBITDA are included herein to provide readers with an understanding of Aveda's anticipated cash flow and Aveda's ability to fund its expenditures based on the assumptions described herein. Readers are cautioned that this information may not be appropriate for other purposes. 

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, 2015 (the "MD&A"), which are available for viewing on SEDAR at www.sedar.com. 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", "Adjusted EBITDA", "gross profit" "gross profit margin", "gross profit excluding depreciation and amortization" and "gross margin excluding depreciation and amortization" which are defined in the MD&A. The above terms as presented do not have any standardized meanings prescribed by international financial reporting standards ("IFRS") and therefore may not be comparable with the calculation of similar measures for other entities. Management uses EBITDA, Adjusted EBITDA, gross profit, gross profit margin, gross profit excluding depreciation and amortization, and gross margin excluding depreciation and amortization to analyze the operating performance of the business. These non-IFRS measures presented are not intended to represent cash provided by operating activities, net earnings or other measures of financial performance calculated in accordance with IFRS.

This MD&A contains the terms "cash flow", "working capital" and "working capital ratio", which do not have any standardized meanings prescribed by IFRS and therefore may not be comparable with the calculation of similar measures for other entities. As an indicator of the Company's performance, cash flow should not be considered as an alternative to, or more meaningful than, net cash from operating activities as determined in accordance with IFRS. The Company considers cash flow to be a key measure as it demonstrates the Company's underlying ability to generate the cash necessary to fund operations and support activities related to its major assets. Cash flow is determined by adding back changes in non-cash operating working capital to cash from operating activities. Management calculates working capital as current assets less current liabilities and uses this measure to analyze operating performance and leverage. 

Notes:
(1) See MD&A Section 8.
(2) Current ratio calculated as current assets divided by current liabilities.
(3) Debt includes loans and borrowings and note payable as per their carrying amounts on the balance sheet.
(4) Gross margin is calculated as gross profit divided by revenue.
(5) Gross margin excluding depreciation and amortization is calculated by dividing gross profit excluding depreciation and amortization by revenue.
(6) Net asset value per share calculated by dividing total equity ($56.7 million) by common shares outstanding (19.1 million).

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.

Contact Information

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