Ceiba Energy Services Inc.
TSX VENTURE : CEB

Ceiba Energy Services Inc.

August 18, 2016 17:35 ET

Ceiba Energy Services Announces Record Revenue, Cash Flow and Adjusted EBITDA in Its Second Quarter 2016 Financial Results

CALGARY, ALBERTA--(Marketwired - Aug. 18, 2016) - Ceiba Energy Services Inc. ("Ceiba" or the "Company") (TSX VENTURE:CEB) is pleased to announce its second quarter 2016 financial results highlighted by record quarterly revenue, cash flow from operating activities and adjusted EBITDA with increases of 19%, 34% and 68% respectively, from the second quarter of 2015. Ceiba continues to be well positioned to execute its business plan and capitalize on growth opportunities. Ceiba has filed its Financial Statements and related Management's Discussion and Analysis for the quarter ended June 30, 2016 on the Company's profile at www.sedar.com.

Adjusted EBITDA as a percentage of revenue improved to 36% in Q2 2016 from 25% in 2015. Gross margins improved to $1.3 million in Q2 2016, increasing 34% from Q2 2015. Gross margin percentage also improved to 54% from 48% in Q2 2015. These results demonstrate our strategy of investing in profitable growth and prudent control of costs during a challenging period in the oil and gas industry.

In Q1 2016, the Company deployed capital to expand services in areas where demand is still strong, opening the Obed Class II disposal facility in February and the Athabasca Class 1B waste water facility in March.

In Q2 2016, Ceiba grew sales at its new Class 1B facilities through focused customer marketing efforts. The Company received 103,000m3 of fluids in Q2 2016, 33% higher than Q1 2016 and a small decrease from Q2 2015. Compared to Q2 2015, Ceiba replaced lower margin terminalling volumes that had been previously received at Kinsella with higher revenue and higher margin disposal volumes at its new facilities.

As the Company continues to focus its sales efforts on higher revenue and higher margin disposal volumes coupled with ongoing cost management, Ceiba believes that the remainder of 2016 will see continued growth compared to 2015 as the new facilities added bring incremental sales volumes.

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

OPERATIONAL AND FINANCIAL HIGHLIGHTS - Q2 2016 AND SUBSEQUENT EVENTS

For the three months ended For the six months ended
($000's unless noted) June 30,
2016
June 30,
2015
2016 Q2
vs.
2015 Q2
June 30,
2016
June 30,
2015
2016
vs.
2015
Total received volume (000's m3) 103 107 (4%) 181 217 (17%)
Revenue 2,442 2,058 19% 4,040 3,671 10%
Gross margin(1) 1,310 979 34% 1,921 1,611 19%
Gross margin %(1) 54% 48% 6% 48% 44% 4%
Adjusted EBITDA(1) 871 517 68% 906 548 65%
Adjusted EBITDA(1)as % of revenue 36% 25% 11% 22% 15% 7%
Total assets 36,678 35,140 N/A
Net working capital(1) (4,926) 12,820 N/A
Convertible debentures 8,769 8,425 N/A
(1) Refer to "NON-GAAP MEASURES AND OPERATIONAL DEFINITIONS" for additional information

2016 Q2 Operational Highlights:

  • Ceiba received 103,000m3 of total fluids in Q2 2016, which was 33% higher than Q1 2016 and slightly lower than Q2 2015. However, as a result of contributions from three new facilities during the period, Ceiba received volumes that were 28% higher than Q2 2015excluding the Kinsella terminalling facility that closed during Q1 2016;
  • Revenue in Q2 2016 of $2.4 million was 19% higher than Q2 2015 and 53% higher than Q1 2016. Relative to Q2 2015, Ceiba has replaced lower revenue and lower margin Kinsella terminalling volumes with higher revenue and higher margin waste fluid disposal volumes;
  • The Company's gross margin in Q2 2016 was $1.3 million (54% of revenue) compared to $979 thousand (48% of revenue) in Q2 2015. This 33% increase was achieved by bringing in higher revenues and higher margin fluids while maintaining operating costs, partially offset by a lower price received for recovered oil due to lower benchmark prices in 2016;
  • Adjusted EBITDA in Q2 2016 increased 68% over Q2 2015 to $871 thousand, and increased by a significant $836 thousand over Q1 2016;
  • Ceiba recorded a loss on impairment of assets in Q2 2016 of $200 thousand on its Central Alberta cash generating unit and a $106 thousand non-cash write down on its inventory; and
  • Ceiba recorded a loss before income tax of $494 thousand in Q2 2016 compared to a loss before income tax of $561 in Q2 2015, an improvement of $67 thousand.

Balance sheet highlights

  • Ceiba ended Q2 2016 with $3.6 million in cash and cash equivalents and $4.9 million of negative net working capital;
  • At June 30, 2016, Ceiba remained undrawn on its $10 million Alberta Treasury Branches ("ATB") credit facility and its only debt consisted of $8.8 million face value of convertible debentures;
  • Subsequent to the end of the quarter, Ceiba repaid $7.3 million face value of convertible debentures upon their maturity on July 31, 2016 with cash on hand and a draw of $5 million of term loans from the ATB credit facility; and
  • On August 10, 2016, Ceiba issued $2.4 million of 9% unsecured convertible debentures maturing June 30, 2020.

FUTURE PLANS AND OUTLOOK

Ceiba is actively pursuing operational and investment activities that further the Company's long term strategic goals while remaining acutely focused on managing the business through the extended downturn. Ceiba's growth strategies include working closely with current and potential new customers to reduce their overall fluid disposal costs, continued operational excellence at its facilities to protect gross margins, and investment in new facilities to meet localized demand.

Ceiba opened the Obed disposal facility in late February 2016 to receive Class II fluids from third parties. The Obed facility has met management's volume expectations and is near the full capacity of the surface equipment. Management is currently assessing the economics of expanding this facility.

The Company opened its Athabasca waste fluid facility in March 2016 and received a regulatory amendment to its operating parameters in April 2016 which allows the facility to better meet the needs of its customers. The Athabasca facility has attracted new customers and product types to Ceiba which the Company had previously been unable to handle at its other facilities. The Athabasca facility represented over 20% of the Company's received volumes in Q2 2016 and volume growth has met management's expectations.

In Q4 2015, Ceiba completed drilling and completion activities for a new disposal well in the Kaybob region. The Company continues to advance development plans and has initiated civil construction. This waste water facility is expected to be operational in late 2016 to service this active market area.

In January 2016, Ceiba temporarily stopped blending operations at its Kinsella facility due to a lack of suitable heavy oil feedstock. Ceiba is considering other alternatives for this non-core asset while monitoring opportunities to reintroduce blending and terminalling operations should appropriate conditions warrant it. While Kinsella contributed approximately 25% of the Company's 2015 received volumes, it had a minimal impact on the Company's gross margins due to the nature of its blending operations and our profit sharing arrangement with our marketing partner at the facility.

Ceiba intends to maintain a conservative balance sheet. The Company has completed the development of its Athabasca waste fluid disposal facility and Obed produced water disposal facility and had cash and cash equivalents of $3.6 million at June 30, 2016, with its $10 million ATB credit facility remaining undrawn. On July 31, 2016, Ceiba repaid its 12% convertible debentures with a portion of its cash on hand plus a draw of $5 million of term loans on its ATB credit facility, replacing high interest debt with lower interest bank financing. On August 10, 2016, Ceiba issued $2.4 million of 9% unsecured convertible debentures maturing June 30, 2020. With the net proceeds from the August debenture financing, the Company's positive cash flow from operating activities and available credit on its ATB credit facilities, Ceiba remains well positioned to fund the remaining development of its Kaybob facility and repay its $1.5 million of 10% convertible debentures due January 31, 2017.

The Company continues to pursue the acquisition of suitable locations for new facilities in under-serviced or constrained markets, which includes assessing and evaluating acquisition opportunities that are both complimentary to the existing asset base and accretive to the long-term business plan.

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 expenses. 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 costs, taxes, 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
June 30,
Six months ended
June 30,
2016 2015 2016 2015
Total loss and comprehensive loss for the period (494) (561) (1,302) (1,446)
Add back:
Finance costs 261 229 508 488
Depreciation 474 359 807 714
Income tax (recovery) - - - -
EBITDA 241 27 13 (244)
Add back:
Share-based compensation 209 385 359 539
Loss on disposal of asset - - - 43
Inventory write down 106 - 106 -
Loss on impairment of assets 200 - 200 -
Accretion 44 34 86 69
Transaction costs 71 71 142 141
Adjusted EBITDA 871 517 906 548
Adjusted EBITDA as percent of revenue 36% 25% 22% 15%

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