Aveda Transportation and Energy Services

TSX VENTURE : AVE


Aveda Transportation and Energy Services

May 28, 2014 16:15 ET

Aveda Transportation and Energy Services Announces Solid Results for the First Quarter of 2014

CALGARY, ALBERTA--(Marketwired - May 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 record revenue and Adjusted EBITDA1 for the three months ended March 31, 2014.

2014 BUSINESS HIGHLIGHTS

  • Revenue for the quarter ended March 31, 2014 grew by $12.0 million to $35.5 million, compared with revenue of $23.5 million for the same period in 2013. US revenue increased by 82.5% and Canadian revenue increased by 6.9% which resulted in overall revenue increase of 51.1%;
  • Generated net income for the quarter ended March 31, 2014 of $2.5 million, an increase of approximately $0.8 million compared to $1.7 million for the same period in 2013. Net income per share for 2014 was $0.15 compared to net income per share of $0.17 in the comparative period;
  • Generated Adjusted EBITDA1 for the quarter ended March 31, 2014 of $6.6 million, an increase of $2.3 million compared with Adjusted EBITDA1 of $4.3 million for the same period in 2013;
  • Expanded equipment base by acquiring $2.4 million of additional equipment and leaseholds in the quarter ended March 31, 2014, including the addition of two cranes;
  • 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"); and
  • 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.

"We are extremely pleased to have delivered another solid quarter of results," said Kevin Roycraft, President and Chief Executive Officer of Aveda "We have delivered these results despite having to overcome the tough industry and weather conditions some of our competitors have talked about. These results are true testament to all the hard work and efforts of our dedicated employees."

The Company announces that Jason McCormick has been appointed as Corporate Secretary of the Company.

The Company will host its first quarter fiscal 2014 results conference call on Thursday, May 29th, 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/1358301/1503345.

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

Financial Overview

(in thousands, except per share and ratio amounts)
Three
Months
Ended March
31, 2014
Three
Months
Ended March
31, 2013
% Change 2013 -
2014
Revenue 35,455 23,471 51.1%
Gross profit5 7,541 4,859 55.2%
Gross margin 21.3% 20.7% N/A
Gross profit5 excluding depreciation and amortization 10,289 6,841 50.4%
Gross margin excluding depreciation and amortization 29.0% 29.1% N/A
Adjusted EBITDA1 6,572 4,306 52.6%
Adjusted EBITDA1 as a percentage of revenue 18.5% 18.3% N/A
Net income 2,544 1,723 47.6%
Net income as a percentage of revenue 7.2% 7.3% N/A
Adjusted EBITDA1 per share 0.38 0.43 -11.6%
Earnings per share - basic 0.15 0.17 -11.8%
Earnings per share - diluted 0.15 0.16 -6.3%
Current ratio2 1.77 2.06 -14.1%
Debt to equity ratio3 0.56 1.14 -50.9%
Debt to EBITDA ratio3, 4 2.20 2.67 -17.5%
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 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 and Midland branches, to experience robust rig counts. In the first quarter of 2014, the average West Texas Intermediate ("WTI") spot price was approximately $99 per barrel, compared to $94 per barrel during the first quarter of 20136.

6 U.S. Energy Information Administration, accessed on May 8, 2014, at http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=rwtc&f=d

In Alberta's portion of the WCSB, first quarter rig counts increased by approximately 3% relative to the same period in 20137. Despite this increase, overall counts remain below 2012 levels due to, in part, on-going export capacity bottlenecks and limited capital expenditures, particularly in natural gas plays.

7 Rig Locator, accessed on May 8, 2014

Although future activity remains uncertain in Canada, many industry analysts are forecasting a positive 2014. Patrick Meneley, Vice Chair of Investment Banking with TD Securities, stated that "the painfully cold winter dramatically increased the drawdown of gas in storage, which will drive a continued demand for gas as the system re-establishes a supply". Dan Tsubouchi, head of research for Haywood Securities in Calgary, stated that "we're seeing a turning point for the Canadian oil and gas sector"8. Increasing confidence in Canada's oil and gas market can be further illustrated through the 11.2% increase in the S&P TSX E&P Index (peer group of large independent producers) in the first quarter of 2014, compared to the S&P TSX Composite which only increased 5.2% during the same period9. As well, during the first four months of 2014, there has been $3.3 billion worth of equity issuances by oil and gas companies, compared to only $500.0 million during the same period a year before signaling increased confidence in the market8.

8 http://business.financialpost.com/2014/04/30/investment-for-oil-and-gas-on-the-upswing/?__lsa=2314-bee8

9 http://arcfinancial.com/research/energy-charts/capital-markets-thaw

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 Count10, drilling activity in the Bakken, Eagleford and Permian basins 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. Aveda's newly acquired terminal in Williston, ND, located in the center of the highly active Bakken region, continues to show significant potential as the experienced M&K team is integrated into the Company. 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 branch is focusing on maximizing revenue and EBITDA by re-directing efforts on acquiring new customers in higher activity, liquids-rich areas to the north. As with the Barnett basin, the Marcellus, which is serviced by Aveda's Williamsport, PA branch, is experiencing decrease in activity.

10 Baker Hughes Rig Count, accessed on May 8, 2014, at http://phx.corporate-ir.net/phoenix.zhtml?c=79687&p=irol-rigcountsoverview

Overall, 2014 is expected to be a strong year for Aveda as oil prices are expected to remain strong and natural gas prices start to recover. First quarter results were positively impacted due to the Canadian dollar depreciating against the US dollar. As Aveda's business grows in the US, this should continue to positively impact results.

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.

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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