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:
Balance sheet highlights
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.
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