Ceiba Energy Services Inc.
TSX VENTURE : CEB

Ceiba Energy Services Inc.

November 24, 2014 21:25 ET

Ceiba Energy Services Announces Continued Growth in Financial and Operating Results in Q3 2014 and Expansion of Operations at its Chamberlain Facility

CALGARY, ALBERTA--(Marketwired - Nov. 24, 2014) - Ceiba Energy Services Inc. ("Ceiba" or the "Company") (TSX VENTURE:CEB) has filed its Financial Statements and related Management's Discussion and Analysis for the three and nine months ended September 30, 2014 on the Company's profile at www.sedar.com.

On November 21, 2014, Ceiba's Chamberlain facility received all approvals necessary to commence operations as the Company's first Class 1B waste management facility.

All tabular amounts are in CDN$ thousands except for per share amounts and otherwise noted.

Ceiba continues in successfully executing its business plan to deliver growth in received volumes, and adjusted EBITDA. Total received volume in Q3 2014 was 119,000 m3, an increase of 16,000 m3 (16%) from Q2 2014 and 77,000 (183%) from Q3 2013. Revenue in Q3 2014 of $1,815 thousand decreased slightly from Q2 2014 by 4% and was an increase of $962 thousand (113%) compared to Q3 2013. Adjusted EBITDA improved to $492 thousand in Q3 2014 from negative $162 thousand in Q3 2013.

OPERATIONAL AND FINANCIAL HIGHLIGHTS
For the three months ended For the nine months ended
($000's unless noted) September 30,
2014
(Q3)
June 30,
2014
(Q2)
2014 Q3
vs.
2014 Q2
September 30,
2013
(Q3)
2014 Q3
vs.
2013 Q3
September 30,
2014
September 30,
2013
2014
vs.
2013
Total received volume (000m3) 119 103 16 % 42 183 % 299 101 196 %
Revenue 1,815 1,884 (4 %) 853 113 % 4,943 2,241 121 %
Gross margin(1) 873 1,017 (14 %) 397 120 % 2,453 905 171 %
Gross margin %(1) 48 % 54 % (6 %) 47 % 1 % 50 % 40 % 10 %
Adjusted EBITDA(1) 492 322 53 % (162 ) N/A 829 (1,473 ) N/A
Total assets 45,721 37,266 N/A 23,271 N/A
Net working capital(1) 18,112 24 N/A (2,711 ) N/A
Convertible debentures 8,171 8,086 N/A 7,835 N/A
(1) Refer to "NON-GAAP MEASURES AND OPERATIONAL DEFINITIONS" below

Operating results

  • Overall, the Company continued to successfully execute its growth strategy, receiving 119,000 m3 of fluid in Q3 2014, an increase of 16,000 m3 (16%) over Q2 2014 and an increase of 77,000 m3 (183%) over Q3 2013. Volume growth compared to the prior quarter came from all facilities and was a result of continued sales efforts by Company staff to make producers aware of its new facilities. Volume growth compared to the prior year was primarily the result of the Chamberlain facility coming on-stream in November 2013, the addition of the Cam-Star disposal wells in February 2014 and Company sales efforts at the Silver Valley facility.
  • The Company continued to ramp up the Chamberlain custom treating facility, which opened for business in the last week of November 2013, processing 40,000 m3 of emulsion fluid in the quarter, an increase of 6,000 m3 (17%) over the prior quarter. Chamberlain is expected to see continued increases in volume through normal Company sales activities and its expansion to a waste management facility in November 2014.
  • Revenue in Q3 2014 of $1,815 thousand was a decrease of $69 thousand (4%) compared to Q2 2014 and an increase of $962 thousand (113%) compared to Q3 2013. The decrease in revenue from Q2 2014 to Q3 2014 was a result of higher processed volumes offset by a combination of a drop in recovered oil volumes along with slightly lower realized prices for recovered oil.
  • The Company achieved gross margins in Q3 2014 of $873 thousand (48% of revenue). Gross margins decreased $144 thousand (14%) compared to Q2 2014 and increased $476 thousand (120%) compared to Q3 2013. Gross margin percentage decreased by 6% compared to Q2 2014 and increased by 1% compared to Q3 2013. The decrease in gross margin and gross margin percentage in Q3 2014 compared to Q2 2014 was the result of approximately $140 thousand of costs related to a plant turnaround and clean-up at Silver Valley.
  • Ceiba achieved another quarter of positive Adjusted EBITDA. Adjusted EBITDA improved to $492 thousand in Q3 2014 from $322 thousand in Q2 2014 and negative $162 thousand in Q3 2013. The increase in Adjusted EBITDA was the result of lower general and administrative costs offset somewhat by lower gross margins.
  • Ceiba reached an agreement effective September 30, 2014 to settle several items with Cancen Oil Processors Inc. ("COPI") and recorded a non-cash pre-tax loss on settlement with COPI of $268 thousand in Q3 2014. Ceiba transferred certain non-core assets to COPI; the 2% Chamberlain royalty owing to COPI was terminated and all amounts due to and from each company were cancelled.

Balance sheet

  • On July 24, 2014, the Company closed a $16.1 million bought deal financing of 23,000,000 Common Shares at $0.70 per Common Share on a private placement basis (the "Private Placement"). The Common Shares issued under the Private Placement have a hold period of four months plus one day.
  • On July 26, 2014, the Company repaid and canceled its term credit facilities.
  • On July 30, 2014, the Company repaid the mezzanine debt in full.
  • Ceiba ended Q3 2014 with $18.1 million in cash and cash equivalents and $18.1 million of positive net working capital.

FUTURE PLANS AND OUTLOOK

The Company continues to execute its growth strategy, which includes continued sales efforts for all its currently operating facilities and the development of facilities to receive new and incremental waste streams. With the New Astra Agreements, Ceiba assumes responsibility for the sales efforts for its waste fluid and waste disposal sites. Ceiba believes that these sales efforts will result in higher volumes at all of its sites. The Chamberlain facility recently received its Class 1B license in late-November 2014. Ceiba is also developing its Athabasca Class 1B waste fluid and water disposal site, where civil work has commenced, with projected commissioning in Q2 2015. The Company has acquired an additional disposal well to expand services at Silver Valley through the development of the Gordondale Class 1B satellite facility. Gordondale is currently in the regulatory approval process and is expected to be commissioned in early Q3 2015.

Currently, the Silver Valley facility is running at approximately 85% disposal capacity and the Company believes that developing the Gordondale satellite site as a Class 1B facility will increase capacity and expand revenue streams. The Company will actively pursue suitable locations to develop new facilities in under serviced or constrained markets and evaluate potential acquisitions that are consistent with the Company's long-term strategy. Ceiba is well capitalized to complete the Athabasca and Gordondale facilities with additional working capital available to pursue its strategy of developing greenfield facilities and assess potential accretive acquisitions.

Demand for the Company's services is dependent on oil and gas production in areas where it has facilities. Uncertainty in oil, gas and natural gas liquids pricing may influence capital spending decisions relating to production and ultimately demand for the Company's services. Demand for the Company's services is also affected by seasonal variations in the Western Canadian Sedimentary Basin. Any adverse changes in the global economy/markets may impact the oil prices and hence the oil field industry in the region. This may impact the ability of the Company to raise capital to support its future growth plans and working capital needs.

NON-GAAP MEASURES AND OPERATIONAL DEFINITIONS

Certain supplementary measures in this MD&A do not have any standardized meaning as prescribed under GAAP and, therefore, are considered non-GAAP measures. These measures are described and presented in order to provide information regarding the Company's financial results, liquidity and its ability to generate funds to finance its operations. These measures are identified and presented, where appropriate, together with reconciliations to the equivalent GAAP measure. However, they should not be used as an alternative to GAAP measures because they may not be consistent with calculations of other companies. These non-GAAP measures, and certain operational definitions used by the Company, are further explained below.

Gross Margin and Gross Margin %

Gross margin is calculated as revenue less operating expenses which includes direct product costs for services but excludes depreciation, depletion and amortization and general and administrative. Management analyzes gross margin as a key indicator of cost control and operating efficiency. Gross margin % is calculated as gross margin as a percentage of revenue.

EBITDA and Adjusted EBITDA

EBITDA refers to net income before finance cost, taxes and depreciation and amortization. Adjusted EBITDA is calculated as EBITDA before costs associated with non-recurring business acquisition costs and share based compensation. These measures do not have standardized definition prescribed by IFRS and therefore may not be comparable to similar captioned terms presented by other users.
Management believes that EBITDA and adjusted EBITDA are key indicators for the results generated by the Company's core business activities as they eliminate non-recurring items, certain non-cash items and the impact of finance and tax structure variables that exist between entities.

($000's) Three months ended Sept. 30, Nine months ended Sept. 30,
2014 2013 2014 2013
Total loss and comprehensive loss for the period (1,110 ) (1,279 ) (2,548 ) (4,239 )
Add back:
Finance costs 308 400 1,386 931
Depreciation 334 72 776 211
Deferred tax recovery - - (387 ) -
EBITDA (468 ) (807 ) (773 ) (3,097 )
Add back:
Stock-based compensation 550 510 763 1,190
Accretion 50 35 153 98
Loss on settlement with COPI 268 - 268 -
Loss on disposal of assets - 28 - 28
Transaction costs 92 72 418 308
Adjusted EBITDA 492 (162 ) 829 (1,473 )

Net Working Capital

Net Working Capital is calculated as total current assets less total current liabilities. Management analyzes net working capital as a measure of our ability to settle short term liabilities with currently available assets.

About Ceiba Energy Services Inc.

Ceiba provides specialized services to the energy sector, specifically to companies involved in the exploration, extraction and production of oil and natural gas in Western Canada. Ceiba develops and constructs facilities in proximity to its customers to provide treatment of crude oil emulsion, terminalling, storage and marketing of oil and disposal of production water.

Reader Advisory

Neither the 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 the accuracy of this release.

Forward-looking statements

Certain information regarding Ceiba in this news release, including management's assessment of its future development plans and access to various external sources of capital, may constitute forward looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with facility construction and oilfield services operations, general risks associated with oil and gas exploration, development, production, marketing and disposal of waste, loss of markets, environmental risks, competition from other service providers, delays resulting from or inability to obtain required regulatory approvals and ability to access sufficient capital from internal and external sources. As a consequence, actual results may differ materially from those anticipated in the forward‐looking statements. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Ceiba's operations and financial results are included in reports on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward‐looking statements or information contained in this news release are made as of the date hereof and Ceiba does not undertake any obligation to update publicly or revise any forward‐looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Contact Information

  • Ceiba Energy Services Inc.
    Ian Simister
    President
    403-262-2783

    Ceiba Energy Services Inc.
    Peter Cheung
    CFO and Corporate Secretary
    403-262-2783