Ceiba Energy Services Announces Fourth Quarter and Year-End 2014 Financial Results, Operational Update and New Credit Facility
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E-mailCALGARY, ALBERTA -- (Marketwired) -- 03/26/15 -- Ceiba Energy Services Inc. ("Ceiba" or the "Company") (TSX VENTURE: CEB) is pleased to announce its year-end 2014 financial results highlighted by record processed volumes, the Company's first year of positive Adjusted EBITDA and a strong financial position at December 31, 2014. Ceiba has filed its Financial Statements, related Management's Discussion and Analysis and Annual Information Form for the year-ended December 31, 2014 on the Company's profile at www.sedar.com.
The Company achieved many significant milestones in its corporate development and long term growth plans in 2014. The commissioning of the Chamberlain facility in November 2013 and the acquisition of Cam-Star Resources (1990) Ltd. ("Cam-Star") in February 2014 contributed to record received volumes of 420,000 m3 during 2014. Higher volumes combined with a focus on operational efficiency all contributed to Ceiba's first year of positive Adjusted EBITDA of $890 thousand.
During 2014, Ceiba issued equity twice for total gross proceeds of $25.3 million, allowing repayment of its high cost mezzanine debt and providing the Company with a strong balance sheet as it enters 2015. Ceiba is well positioned to continue its momentum into 2015, despite the energy sector challenges from recent declines in commodity prices.
In early 2015, Ceiba acquired three wellbores and surface leases in an oil producing area in Alberta from a third party for a nominal amount for the purpose of developing a future waste disposal site. The Company also received all regulatory approvals for the Athabasca facility and all regulatory approvals to commence development of the Gordondale facility.
The Company is also pleased to announce that it has signed a commitment letter ("Commitment Letter") with Alberta Treasury Branches ("ATB") for credit facilities of up to $15,000,000 subject to achieving certain EBITDA thresholds.
All tabular amounts are in CDN$ thousands except for per share amounts and where otherwise noted.
OPERATIONAL AND FINANCIAL HIGHLIGHTS - 2014 Q4
For the three months ended
December September 2014 Q4 December 2014 Q4
31, 2014 30, 2014 vs. 2014 31, 2013 vs. 2013
($000's unless noted) (Q4) (Q3) Q3 (Q4) Q4
----------------------------------------------------------------------------
Total received volume
(000's m3) 121 119 2% 59 105%
Revenue 1,836 1,815 1% 791 132%
Gross margin(1) 827 873 (5%) 215 285%
Gross margin %(1) 45% 48% (3%) 27% 18%
Adjusted EBITDA(1) 62 492 (87%) (42) N/A
Total assets 35,729 45,721 N/A 26,969 N/A
Net working capital(1) 14,871 18,112 N/A (3,603) N/A
Convertible debentures 8,258 8,171 N/A 7,919 N/A
OPERATIONAL AND FINANCIAL HIGHLIGHTS - 2014
For the year ended
December December December 2014 vs.
($000's unless noted) 31, 2014 31, 2013 31, 2012 2013
---------------------------------------------------------------------------
Total received volume (000's m3) 420 160 34 162%
Revenue 6,779 3,032 764 124%
Gross margin(1) 3,280 1,120 (348) 193%
Gross margin %(1) 48% 37% NMF(2) 11%
Adjusted EBITDA(1) 890 (1,827) (2,808) N/A
Net loss and comprehensive loss (12,812) (7,581) (3,277) NMF(2)
Net loss per share, basic and
fully diluted $ (0.13) $ (0.11) $ (0.06) NMF(2)
Total assets 35,729 26,969 21,601 N/A
Net working capital(1) 14,871 (3,603) (59) N/A
Total non-current liabilities 12,199 10,538 8,884 N/A
(1) Refer to "NON-GAAP MEASURES AND OPERATIONAL DEFINITIONS" for additional
information
(2) NMF = "not meaningful"
2014 Highlights
-- Total received volumes increased 162% from 160,000 m3 to 420,000 m3 from
the execution of the Company's long term growth strategy:
i. Expand capabilities at existing facilities - the Silver Valley and
Kinsella facilities experienced volume growth of nearly 100,000 m3
in 2014 compared to 2013;
ii. Build scalable facilities - the Chamberlain facility was
commissioned in November 2013 and re-commissioned as a Class 1B
facility in November 2014. Full year operations at Chamberlain in
2014 resulted in over 100,000 m3 of fluids received during the year;
and
iii.Strategic acquisitions - acquired Cam-Star on February 1, 2014 to
add three Class II produced water disposal facilities in Central
Alberta. The facilities added over 65,000 m3 of fluids received in
2014.
-- Achieved the Company's first year of positive Adjusted EBITDA of $890
thousand, an improvement over 2013 of negative $1,827 thousand and 2012
of negative $2,808 thousand ($2,717 thousand and $3,698 thousand
increase in Adjusted EBITDA compared to 2013 and 2012, respectively).
-- Renegotiated agreements with Astra Energy Canada Inc. ("Astra") that
simplify the Company's relationship with Astra, eliminate the
administration required for the previous Agreements and provide greater
flexibility for Ceiba to execute its growth strategy of developing waste
processing facilities.
-- Raised $25.3 million in new equity in two private placements to repay
high cost debt and provide financial flexibility for future growth -
Ceiba ended 2014 with $14.9 million of positive working capital and $6.0
million of positive liquidity after netting off the face value of
Ceiba's convertible debentures.
-- Added a number of key resources in engineering, operations and financial
services to meet the Company's current and short term growth
requirements.
-- Added two directors with extensive waste management and energy services
experience to the Board.
-- Incurred approximately $4 million of capital expenditures (before
acquisitions) to optimize existing operations, expand capabilities and
prepare for future growth projects.
2014 Q4 Financial and Operating Results
-- Overall, the Company continued to successfully execute its growth
strategy, receiving 121,000 m3 of fluid in Q4 2014, an increase of 2,000
m3 (2%) over Q3 2014 and an increase of 62,000 m3 (105%) over Q4 2013.
Volume growth at the Silver Valley and Kinsella facilities offset small
volume decreases at the Chamberlain and Central Alberta facilities. 2014
Q4 volume growth compared to the prior year was 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 and Kinsella facilities.
-- The Chamberlain facility was re-commissioned as a 1B fluid disposal
facility in November 2014 and began receiving 1B fluids in December
2014.
-- Revenue in Q4 2014 of $1,836 thousand was an increase of $21 thousand
(1%) compared to Q3 2014 and an increase of $1,045 thousand (132%)
compared to Q4 2013. The change from Q3 2014 to Q4 2014 was the result
of a decrease in recovered oil revenue due to lower benchmark oil prices
offset by revenue from Class 1B fluids at Chamberlain and higher
recoveries and revenue at Kinsella.
-- The Company achieved gross margins in Q4 2014 of $827 thousand (45% of
revenue) compared to Q3 2014 of $873 thousand (48% of revenue). Gross
margins decreased $46 thousand (5%) compared to Q3 2014 and increased
$612 thousand (285%) compared to Q4 2013. Gross margin percentage
decreased by 3% compared to Q3 2014 and increased by 18% compared to Q4
2013. The decrease in gross margins from Q3 2014 to Q4 2014 was the
result of a decrease in repairs and maintenance and supplies expense in
Q4 2014 more than offset by an increase in direct wages and benefits for
field staff due to the timing of Ceiba's pay periods in Q4 compared to
Q3 2014.
-- The Company achieved another quarter of positive Adjusted EBITDA.
Adjusted EBITDA was $62 thousand in Q4 2014, marking four consecutive
quarters and one full year of positive Adjusted EBITDA. Adjusted EBITDA
decreased $430 thousand from Q3 2014 and increased $104 thousand from Q4
2013. The decrease in Adjusted EBITDA in Q4 2014 compared to Q3 2014 was
the result of lower gross margins and higher general and administrative
expenses from the normalization of wages and benefits in Q4 2014
compared to Q3 2014 (Q3 2014 included a recovery of $259 thousand
related to the settlement of agreements between the Company and BK
Petersen Holdings Ltd.).
-- Ceiba recorded a net loss of $10,264 thousand in Q4 2014 and $12,812
thousand in full year 2014, primarily as a result of a non-cash
impairment charge of $9,135 thousand on the Company's goodwill and
property, plant and equipment assets. As a result of the significant
decline in commodity prices in the fourth quarter of 2014 and reduced
capital budgets set by oil and gas producers, the Company tested all of
its assets for impairment. Based on the impairment tests performed,
Ceiba recorded a goodwill write down of $1,671 thousand and a property,
plant and equipment impairment of $7,464 thousand for the twelve months
ended December 31, 2014. The loss on impairment of assets and goodwill
are non-cash charges based on the environment at the end of 2014 and do
not affect management's view of the long term value of the Company's
assets. Management's objective is to grow volumes and improve
profitability at each of our facilities to achieve higher long term
value than their carrying amount on our financial statements.
Balance sheet highlights
-- Ceiba ended 2014 with $14.6 million in cash and cash equivalents and
$14.9 million of positive net working capital.
FUTURE PLANS AND OUTLOOK
On January 21, 2015, Ceiba received the waste management permit from the AER for its Athabasca facility. This permit, combined with the development permit already received, allows the Company to proceed with construction of the facility within one-year of the development permit, unless extended. Ceiba received the waste disposal permit for the disposal well on February 25, 2015.
On March 18, 2015, Ceiba received the waste management permit from the AER for its Gordondale facility. This permit, combined with the development permit already received, allows the Company to proceed with construction of the facility, which is expected to occur during 2015. Ceiba expects to receive the waste disposal permit for the disposal well in due course. During 2014, Ceiba completed a workover of the Gordondale disposal well which is expected to support disposal volumes of 300 m3 to 400 m3 per day.
The Company has prudently revised its near term capital plan and growth strategy in light of the current depressed commodity price environment in western Canada and resulting 35% reduction in drilling rigs in service year-over-year. Ceiba expects to continue to grow the number of owned facilities and received volumes in 2015 compared to 2014, but has moderated its previously expected 2015 growth rates. Ceiba's revised growth strategy includes:
-- Continue to optimize operations at existing facilities to protect
volumes and gross margins;
-- Grow Class 1B volumes at Chamberlain;
-- Develop the Gordondale facility;
-- Suspend the development of the Athabasca facility until commitments for
disposal volumes are established;
-- Be ready to develop greenfield sites once oil and gas activity levels
stabilize because attractive organic growth opportunities remain ;
-- Continue to pursue acquisitions, especially from entities that may be
facing financial difficulties in the low commodity price environment;
and,
-- Be well capitalized with the financial flexibility to return to higher
growth targets if commodity prices increase in the near term.
The Company's operating and capital activities include continued sales efforts for all its current 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 all of its facilities except for the Kinsella terminal. The Chamberlain facility received its Class 1B license in late-November 2014. 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 the Company anticipates commissioning in early Q4 2015. Ceiba has temporarily suspended the development of its Athabasca 1B facility, which has now received all regulatory approvals and development permits. Ceiba will re-evaluate the market for waste fluids from the Athabasca oil sands region once operators have re-assessed their operations and capital programs for 2015.
Currently, the Silver Valley facility is running at approximately 90% 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 greenfield facilities and assess potential accretive acquisitions that are consistent with the Company's long-term strategy. The Company will actively pursue suitable locations to develop new facilities in under serviced or constrained markets and in early 2015, Ceiba acquired three wellbores and surface leases from a third party for a nominal amount for the purpose of developing a future waste disposal site.
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.
ATB Credit Facilities
On March 26, 2015, Ceiba entered into a $15,000,000 credit facility commitment letter with ATB. A $5,000,000 revolving credit facility is immediately available. The revolving facility has an interest rate of prime plus 160 basis points per annum and a stand-by fee of 40 basis points per annum on the amount available. The revolving facility is due on demand with no set maturity date. A $10,000,000 term credit facility is available when Ceiba achieves certain income milestones. The term credit facility has an interest rate of prime plus 175 basis points per annum and a stand-by fee of 40 basis points per annum on the amount available. The term credit facility provides for monthly interest only payments. The term credit facility matures on May 31, 2016 unless extended at the option of ATB.
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.
Three months ended For the year ended
($000's) December 31, December 31,
----------------------------------------
2014 2013 2014 2013
----------------------------------------
Total loss and comprehensive loss
for the period (10,264) (3,342) (12,812) (7,581)
Add back:
Finance costs 219 559 1,605 1,489
Depreciation 351 169 1,127 380
Income tax expense/(recovery) 257 - (130) -
----------------------------------------
EBITDA (9,437) (2,614) (10,210) (5,712)
Add back:
Share-based compensation 255 519 1,018 1,709
Accretion 37 7 189 105
Loss on impairment of goodwill 1,671 2,024 1,671 2,024
Loss on impairment of assets 7,464 - 7,464 -
Loss on settlement with COPI - - 268 -
Gain on disposal of assets - - - (283)
Transaction costs 72 22 490 330
----------------------------------------
Adjusted EBITDA 62 (42) 890 (1,827)
----------------------------------------
----------------------------------------
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.
Contacts: Ceiba Energy Services Inc. Ian Simister President 403-262-2783 Ceiba Energy Services Inc. Peter Cheung CFO and Corporate Secretary 403-262-2783
Source: Ceiba Energy Services Inc.
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