Ceiba Energy Services Inc.
TSX VENTURE : CEB

Ceiba Energy Services Inc.

August 18, 2015 17:33 ET

Ceiba Energy Services Announces Second Quarter 2015 Operating and Financial Results, Increased Capital Budget and New Corporate Website

CALGARY, ALBERTA--(Marketwired - Aug. 18, 2015) - Ceiba Energy Services Inc. ("Ceiba" or the "Company") (TSX VENTURE:CEB) is pleased to announce its second quarter 2015 financial results highlighted by record revenue of $2,058 thousand and an adjusted EBITDA of $517 thousand. Ceiba has filed its Financial Statements, related Management's Discussion and Analysis and Annual Information Form for the three and six months ended June 30, 2015 on the Company's profile at www.sedar.com.

The Board of Directors has approved additional capital expenditures of $6.5 million to complete the Athabasca fluid disposal facility and to begin development of a new greenfield facility.

The Company is pleased to announce a re-designed corporate website at www.ceibaenergy.com where interested parties can find more information about the Company.

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

OPERATIONAL AND FINANCIAL HIGHLIGHTS - 2015 Q

For the three months ended For the six months ended
($000's unless noted) June 30,
2015 (Q2)
June 30,
2014 (Q2)
2015 Q2
vs.
2014 Q2
June 30,
2015
June 30,
2014
2015
vs.
2014
Total received volume (000's m3) 107 103 4% 217 180 21%
Revenue 2,058 1,884 9% 3,671 3,128 17%
Gross margin(1) 979 1,016 (4%) 1,611 1,580 2%
Gross margin %(1) 48% 54% (6%) 44% 51% (7%)
Adjusted EBITDA(1) 517 322 61% 548 337 63%
Total assets 35,140 37,266 N/A
Net working capital(1) 12,820 24 N/A
Convertible debentures 8,425 8,086 N/A
(1) Refer to "NON-GAAP MEASURES AND OPERATIONAL DEFINITIONS" for additional information

2015 Q2 Highlights

  • Ceiba achieved record quarterly revenues in Q2 2015 of $2,058 thousand, an increase of $174 thousand (9%) compared to revenue of $1,884 thousand in Q2 2014. Expansion of services at the Chamberlain facility in November 2014 to include the acceptance of 1B fluids drove the increase, which was somewhat offset by lower oil prices received for the Company's recovered oil.
  • Although the decline of activity in the industry led to a slight reduction overall of emulsion and produced water received into the Company's facilities, Ceiba received 107,000 m3 of fluid in Q2 2015, a net increase of 4,000 m3 (4%) over Q2 2014 due primarily to the Chamberlain expansion.
  • The Company achieved a gross margin of $979 thousand (48% of revenue) in Q2 2015, compared to $1,016 thousand (54% of revenue) in Q2 2014. The decrease of $37 thousand (4%) compared to Q2 2014 is primarily attributable to the reduced price received for recovered oil relative to the overall service mix as well as a reallocation of certain general and administrative staff to operations.
  • Adjusted EBITDA was $517 thousand in Q2 2015, marking six consecutive quarters of positive Adjusted EBITDA. The increase of $195 thousand (61%) in Adjusted EBITDA from Q2 2014 to Q2 2015 is a result of higher revenue and a reduction in total operating and general and administrative costs.
  • Ceiba recorded a loss before income tax of $561 thousand in Q2 2015 compared to a loss before income tax of $688 in Q2 2014, an improvement of $127 thousand (18%).
  • Ceiba initiated construction of its Gordondale waste fluid facility in June 2015 and is on track to be fully operational for Q4 2015.

Balance sheet highlights

  • Ceiba ended Q2 2015 with $12.4 million in cash and cash equivalents and $12.8 million of positive net working capital.

FUTURE PLANS AND OUTLOOK

Demand for services at Ceiba's facilities is tied to the levels of drilling and production in the geographical regions we operate. However, each of Ceiba's facilities will be impacted differently by current low oil and natural gas prices in Western Canada. Ceiba's Silver Valley and soon to open Gordondale sites are located in areas of continued strong industry activity. Silver Valley's overall volumes are not expected to change significantly in 2015 compared to 2014. The Chamberlain facility has been positively impacted by its expansion of services in November 2014 to receive 1B waste fluids. The new waste fluids received are expected to more than offset a reduction in custom treating activity at this facility. The Central Alberta facilities have been impacted by lower oil and natural gas prices and volumes are expected to decline in 2015 compared to 2014. The Kinsella facility continues to operate near capacity, though this facility is non-core and does not contribute materially to Ceiba's gross margins. The weakening of the Canadian dollar relative to the US Dollar has reduced the impact of a drop in global and North American oil prices for Canadian producers. However, current lower oil prices have resulted in lower revenue for the Company's recovered oil. Management will continue to monitor producer activity levels in Western Canada in general and around our current and planned facilities in particular with a view of reducing financial risk from further drops in the price of oil and natural gas.

The Company is currently completing construction of its Gordondale waste fluid facility, which is scheduled to open in Q4 2015. The addition of the Gordondale facility is expected to support disposal volumes of approximately 300 m3 per day.

Currently, the Silver Valley facility is running at approximately 75% disposal capacity and the Company believes that developing the Gordondale satellite site as a Class 1B facility will increase capacity and expand revenue streams. Ceiba is well capitalized to complete the Gordondale facility with additional working capital available to pursue its strategy of developing future facilities and assess potential accretive acquisitions that are consistent with the Company's long-term strategy. The Company continues to actively pursue suitable locations to develop new facilities in under serviced or constrained markets.

Ceiba is moving forward to complete the Athabasca 1B waste fluid disposal facility in early 2016. After deferring construction of the Athabasca facility in late 2014 to better understand the impact of lower oil prices on the waste fluid market for the facility, Ceiba continued to undertake extensive market analysis and customer discussions. This has led the Company to remain confident about its original investment decision as waste fluid supply is expected to remain strong in the target markets. Ceiba expects to invest $4.0 million to complete construction of the facility for an early 2016 opening.

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 oilfield 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.

SHARE UNIT GRANT

Ceiba has granted a total of 95,774 share units to executives and non-executive directors of the Company in lieu of cash. This represents approximately 90% of the non-executive directors' compensation for the quarter and 10% of executive management salaries starting June 1, 2015. The share units have been granted pursuant to the Company's share unit compensation plan, have a $0.01 exercise price and will expire five years from the date of grant. Subsequent to this share unit grant, Ceiba will have a total of 185,655 share units outstanding.

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,
2015 2014 2015 2014
Total loss and comprehensive loss for the period (561) (688) (1,446) (1,436)
Add back:
Finance costs 229 601 488 1,078
Depreciation 359 191 714 442
Income tax (recovery) - - - (387)
EBITDA 27 104 (244) (303)
Add back:
Share-based compensation 385 90 539 212
Loss on disposal of asset - - 43 -
Accretion 34 57 69 102
Transaction costs 71 71 141 326
Adjusted EBITDA 517 322 548 337

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
    www.ceibaenergy.com