Aveda Transportation and Energy Services Inc. (“Aveda” or the
“Company”) (TSX-V:AVE), North America’s largest dedicated rig
moving company, today announced its results for the three months
and six months ended June 30, 2017.
“With more than 90 percent of revenue generated
from our US operations, our high level of exposure to the US market
has helped to produce record results for our company,” said Ronnie
Witherspoon, President and Chief Executive Officer for Aveda. “Even
as industry fundamentals continue to reset, for the past two
quarters and year-to-date, Aveda has reported record revenue.”
“We have captured new business opportunities as rig
counts continued to increase in every US basin in which we
operate,” Mr. Witherspoon continued. “Along with continuing to
capture market share, our priorities for the remainder of the year
are to remain focused on continuous improvement, higher utilization
rates as a result of asset optimization and improved scheduling of
our services and equipment to further strengthen our margins.”
2017 Second Quarter Business
Highlights
- Generated record revenue for the three months ended June 30,
2017 of $52.1 million. This is the most revenue Aveda has ever
reported in any quarter in the Company’s history. Aveda has now
reported four sequential quarters of revenue growth and two
sequential quarters of record revenue. Revenue in the second
quarter of 2017 increased by $43.1 million or almost 500%, compared
with revenue of $8.9 million for the same period in 2016;
- For the three months ended June 30, 2017, the Company reported
gross profit before depreciation and amortization1 of $9.7 million.
This is the highest level of gross profit before depreciation and
amortization1 the Company has ever reported in a second quarter.
Gross profit excluding depreciation and amortization1 in the second
quarter of 2017 increased by almost $10.0 million compared to a
loss of $0.2 million in 2016;
- Generated record Adjusted EBITDA1 of $5.1 million for the three
months ended June 30, 2017. This is the greatest amount of Adjusted
EBITDA1 the Company has ever reported in a second quarter in
Aveda’s history. Adjusted EBITDA1 increased by $2.5 million or
approximately 100% compared to the first quarter of 2017. Aveda has
now reported four quarters of sequential Adjusted EBITDA1 growth.
Adjusted EBITDA1 in the second quarter of 2017 increased by almost
$9.0 million compared to a loss of $3.7 million in the second
quarter of 2016;
- Net loss for the three months ended June 30, 2017 decreased by
$8.5 million to $1.3 million, compared to a net loss of $9.8
million for the same period in 2016. Loss per share was $0.02
compared to $0.51 in the comparative period;
- Aveda expanded its operational footprint by opening new
terminals in Casper, WY and in Midland, TX (the Midland terminal
will start generating revenue in the third quarter of 2017 – see
June MD&A for additional information); and
- Aveda ended the quarter with a net asset value per share6 of
$0.67, $21.5 million in working capital with a current ratio of
1.8:1, and undrawn cash availability of $22.8 million on its senior
debt facility.
First Half 2017 Business
Highlights
- Generated record revenue for the six months ended June 30, 2017
of $93.0 million. This is the most revenue that Aveda has ever
reported in the first half of any year in the Company’s history.
Revenue in the first six months of 2017 increased by $72.1 million
or approximately 350%, compared with revenue of $20.9 million for
the same period in 2016;
- Recorded gross profit before depreciation and amortization1 of
$16.5 million in the six month period ended June 30, 2017. Gross
profit excluding depreciation and amortization1 in the first six
months of 2017 increased by almost $17.0 million to $16.5 million
compared to a loss of $0.3 million in 2016;
- Reported Adjusted EBITDA1 of $7.7 million for the six months
ended June 30, 2017. Adjusted EBITDA1 in the first half of 2017
increased by over $15.0 million compared to a loss of $7.6 million
in the comparative period of 2016;
- Net loss for the six months ended June 30, 2017 decreased by
$15.4 million to $4.7 million, compared to a net loss of $20.1
million for the same period in 2016. Loss per share was $0.10
compared to $1.05 in the comparative period;
- Aveda restructured its debt in the first quarter of 2017 as
further outlined in the June MD&A and in the news release dated
January 13, 2017;
- The Company also raised gross proceeds of $22.9 million through
an equity offering as outlined in the news released dated, February
22, 2017; and
- As a result of both successfully restructuring its debt and
raising the equity outlined above, the Company now has a
significantly stronger balance sheet.
The Company’s consolidated financial statements and
management’s discussion and analysis (“June MD&A”) for the
three and six months ended June 30, 3017 are available on the
Company’s website at www.avedaenergy.com and the SEDAR website at
www.sedar.com.
Banking
Update
Due to the strong performance of Aveda in the first
half of 2017, the Company’s banking syndicate (the “Bank”) has
agreed to make the following changes to Aveda’s loan
agreements:
- Effective July 1, 2017, the Company’s interest rate pricing
structure will be based on the agreed upon interest rate grid (see
the Company’s news release dated January 13, 2017 (“January
Release”) for further information). Based on the current structure,
this will reduce Aveda’s borrowing costs on its bank debt by 50
basis points; and
- The Company had received support from its Executive Chairman,
David Werklund in the form of a Standby Facility (as defined in the
January Release). Effective August 4, 2017, the Bank has agreed to
release obligations of the Standby Facility. The Company has
terminated the Standby Facility and paid all obligations due.
Aveda’s board of directors (the “Board”) and management, thank Mr.
Werklund for his strong support of the Company.
Board of Directors
Update
Aveda is pleased to report that Mr. Larry Heidt has
been appointed to its Board as an independent director. Mr. Heidt
is a distinguished businessman who offers a significant depth of
expertise in the oilfield services arena and has held executive
level roles for nearly thirty years. He held the role of President
with Bawden Drilling, Noble Drilling, and Nabors Drilling and later
was the President and CEO of Nabors Well Services. Upon the
acquisition of Nabors Well Services by C&J Energy Services, he
continued as the President of Production Services and has most
recently been a professional advisor to executives with C&J
Energy Services. Aveda’s Board and management welcome Mr. Heidt and
look forward to working with him.
Investor Relations
Update
The Company has posted an updated corporate
presentation and fact sheet to its website. The updated information
can be found at
www.avedaenergy.com/investor-hub/presentations/default.aspx.
Aveda’s CEO and CFO also expect to be making
presentations to retail and institutional investors in September as
well as presenting at the Subscriber Investment Summit
(www.subscribersummit.com) in Vancouver on October 3, 2017.
Conference
Call
The Company will host its second quarter fiscal
2017 results conference call on Wednesday, August 16, 2017 at 10:30
a.m. Eastern Time (ET). 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
(416) 915-3239 or (403) 351-0324. A live audio webcast of the
conference call will be available at:
http://services.choruscall.ca/links/aveda20170816.html.
The conference call webcast will be archived and
available until September 30, 2017
at:http://www.avedaenergy.com/investor-hub/conference-calls/default.aspx.
Financial
Overview
(in
thousands, except per share and ratio amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2017 |
Three Months Ended June 30, 2016 |
% Change 2016 - 2017 |
Six Months Ended June 30, 2017 |
Six Months Ended June 30, 2016 |
% Change 2016 - 2017 |
Revenue |
52,059 |
|
8,920 |
|
484 |
% |
93,021 |
|
20,931 |
|
344 |
% |
Gross profit
(loss)1 |
5,781 |
|
(4,580 |
) |
226 |
% |
8,713 |
|
(9,367 |
) |
193 |
% |
Gross margin4 |
11 |
% |
-51 |
% |
N/A |
|
9 |
% |
-45 |
% |
N/A |
|
Gross profit (loss)1
excluding depreciation and amortization |
9,724 |
|
(197 |
) |
5036 |
% |
16,522 |
|
(329 |
) |
5122 |
% |
Gross margin excluding
depreciation and amortization5 |
19 |
% |
-2 |
% |
N/A |
|
18 |
% |
-2 |
% |
N/A |
|
Adjusted EBITDA
(loss)1 |
5,103 |
|
(3,745 |
) |
236 |
% |
7,662 |
|
(7,610 |
) |
201 |
% |
Adjusted EBITDA1 as a
percentage of revenue |
10 |
% |
-42 |
% |
N/A |
|
8 |
% |
-36 |
% |
N/A |
|
Net loss |
(1,285 |
) |
(9,758 |
) |
-87 |
% |
(4,697 |
) |
(20,051 |
) |
-77 |
% |
Net loss as a
percentage of revenue |
-2 |
% |
-109 |
% |
N/A |
|
-5 |
% |
-96 |
% |
N/A |
|
Adjusted EBITDA (loss)1
per share |
0.09 |
|
(0.20 |
) |
145 |
% |
0.17 |
|
(0.40 |
) |
143 |
% |
Loss per share - basic
and diluted |
(0.02 |
) |
(0.51 |
) |
-96 |
% |
(0.10 |
) |
(1.05 |
) |
-90 |
% |
Current ratio2 |
1.8 |
|
1.6 |
|
12 |
% |
1.8 |
|
1.6 |
|
12 |
% |
Debt to equity
ratio3 |
2.0 |
|
2.3 |
|
-11 |
% |
2.0 |
|
2.3 |
|
-11 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 US and the WCSB.
2016 was a challenging year, yet the Company
steadily improved its performance in the last two quarters of 2016
and the trend continues into 2017 with the Company generating
positive Adjusted EBITDA in the third and fourth quarters of 2016
and the first two quarters of 2017. Relative to the first half of
2016, both oil and natural gas prices have rebounded and rig counts
in both Canada and the United States have substantially risen in
the first half of 2017. Activity levels, particularly in the United
States, are continuing to increase.
In the third quarter of 2016, the Company opened a
second location in the Permian Basin in Pecos, TX. In the fourth
quarter of 2016, the Company recommenced operations in the
Marcellus Shale in Williamsport, PA. In the first quarter of 2017,
the Company expanded its operations by opening a satellite facility
in Casper, WY to service the Uinta, Wamsutter, Pinedale and DJ
Basins. In the second quarter of 2017, the Company has expanded its
operations by opening a new satellite yard in Midland, TX in the
Permian Basin. The new Midland, Texas branch will not start
generating revenue until the third quarter of 2017. This new
Midland, Texas branch is not expected to generate any significant
incremental revenue for Aveda. However, it is expected to
contribute towards the Company’s goal of reducing third party
sub-contractor revenues (see below). The Company also expanded its
operations in the second quarter of 2017 by relocating its existing
operations in Marshall, TX to a larger facility and expanding its
operations at that location. The Company has also signed a new
lease and will be opening a terminal in Martins Ferry, OH in the
third quarter of 2017. This new facility will serve both the Utica
and Marcellus basins.
The Company restructured its senior leadership team
in the first half of 2016 with individuals that have extensive
relationships in the oil and gas sector. Through these
relationships, the Company is being invited to participate in an
increased amount of bid activity. The Company’s revenue
results since the new management team took over can be seen
here:
http://www.globenewswire.com/NewsRoom/AttachmentNg/15cb1e42-c278-4b48-a38f-3121ded03dd7
It is important to note that although the Company
generated more revenue in June 2017 than it did in any other month
of the second quarter of 2017, Aveda generated less Adjusted EBITDA
during that same month in the quarter. The lower Adjusted EBITDA
generated in June on higher revenues can be attributed primarily to
high third party utilization as well as labour inefficiencies
associated with the unplanned higher volumes. Please see below
regarding Aveda’s plans to reduce the use of third party
subcontractors and increase efficiency and utilization of the
Company’s equipment. Preliminary July revenues are estimated at
$16.9 million.
During the first half of 2017, the Company
benefited from a relatively weaker Canadian dollar. Revenues have
also benefited from several long-distance rig moves the Company was
awarded. The Company does not expect to see the same volume of
long-distance rig moves in the second half of 2017 as it witnessed
in the first half of the year. Further, the US dollar has
depreciated against the Canadian dollar in the early part of the
third quarter. Should the US dollar retain its current value or
depreciate further, this would have a negative impact on the
Company’s revenues in the second half of 2017 as compared to the
first half of the year. However, Aveda is committed to improving
the quality of its revenue by shifting more revenue to owned
equipment versus the use of third party subcontractors. During the
second quarter of 2017, the Company’s reliance on third party
subcontractors as a percentage of revenue increased substantially.
As noted in the June MD&A, Aveda only generated $0.3 million of
gross profit on $20.0 million of third party revenue. Almost all of
Aveda’s gross profit is generated from the Company’s equipment, not
through the use of third parties. Consequently, in the third
quarter of 2017 the Company established a special task force to
increase utilization of Aveda’s fleet and reduce third party
expenditures. The task force will be:
- Relocating assets at all Aveda branches to optimize
utilization. The task force expects to have the majority of this
work completed by the end of September; and
- Activating all power units held for future expansion by the end
of the year. Due to the significant demand for Aveda’s services,
our existing operations do not have capacity to quickly activate
all the power units in the Company’s fleet. Further, the task force
noted that some branches are unable to keep up with servicing all
their equipment to keep 100% up time capacity on their fleet. As a
result, Aveda is recommencing operations in its Mineral Wells, TX
facility which will be focused on both equipment activations and
equipment overhauls.
The equipment activation and refurbishment program
is expected to have all of Aveda’s power units activated and
working in the first quarter of 2018. Aveda expects through
equipment activations and refurbishment to increase its working
equipment fleet by 15 – 20%. While there will be costs associated
with relocating equipment to increase utilization and recommencing
operations in Mineral Wells, the Company expects it will
substantially reduce third party expenses and significantly improve
Aveda’s long-term profitability.
Based on the information above, Aveda expects to
see continued improvements in Adjusted EBITDA and net income
results in 2018.
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, Wyoming, Oklahoma,
Ohio and North Dakota. Aveda balances Performance, Safety and Value
for our Customers through Leadership, Financial Discipline and
Proper Planning, while providing a culture of Family for our
employees. Aveda strives for a world where its operations improve
the daily experience of our customers, our employees, and every
person we meet on the road to success.
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, Edson, AB, Pleasanton, TX,
Midland, TX, Pecos, TX, Marshall, TX, Williston, ND, Casper, WY,
Williamsport, PA, Martins Ferry, OH and Oklahoma City, OK. Aveda is
publicly traded on the TSX Venture Exchange under the symbol AVE.
Aveda has 15 locations which cover North America’s most prolific
oil and gas plays. The Company has almost 1,500 pieces of modern,
well maintained equipment and employs 520 team members. Aveda’s
unique differentiator is our advanced operational and safety
culture. 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, Adjusted
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, EBITDA and Adjusted 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, 2016 (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 News Release 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 June 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 ($38.6 million) by the common shares outstanding (57.3
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.
For more information, please contact:
Bharat Mahajan, CA
Vice President, Finance and Chief Financial Officer
(403) 264-5769
bharat.mahajan@avedaenergy.com
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