CALGARY, ALBERTA--(Marketwired - March 8, 2017) - Ceiba Energy Services Inc. ("Ceiba" or the "Company") (TSX VENTURE:CEB), a growing environmental fluids processing and disposal company, announces its year-end 2016 financial results. Ceiba has filed its Financial Statements and related Management's Discussion and Analysis for the year-ended December 31, 2016 on the Company's profile at www.sedar.com.
Ceiba has positioned itself as a growing energy services company with an ability to improve cash flow and profitability in 2017 and beyond. In a challenging year of low commodity prices and slower overall industry activity, Ceiba deployed growth capital to develop new facilities in strategic areas that will contribute to the Company's future growth:
The Company is reporting lower volumes and lower margins in the fourth quarter of 2016 compared to the fourth quarter of 2015. Ceiba received 87,000 m3 in volumes during the fourth quarter of 2016, a 26% reduction from the same period in 2015. Volume reductions were caused by slower industry activity and abnormally wet weather in Northwestern Alberta. Ceiba's Eastern Alberta facilities were affected by increased competition and lower oil sands activity.
For the full year, volumes were 381,000 m3, or down 13% compared to 2015. Year over year volume decreases at existing sites due to slower market activity were partially offset by the three new facilities opened in 2016 and a full-year of contributions from the Gordondale facility.
In November 2016, Ceiba announced the opening of its fourth Class 1B facility in the Fox Creek Area of Alberta. Market demand in the area remains strong, however injection expectations for the disposal well have not been met. Ceiba is planning to remediate the well in the second half of 2017.
Ceiba's near term focus for 2017 is to increase volumes, reduce costs and prudently manage capital spending. Early indications for Q1 2017 show increasing industry activity which is driving volume increases in the first two months of 2017 that are 45% higher than the first two months of 2016 and 30% higher than the first two months of Q4 2016. Additionally, the Company was recently awarded a four-year contract for disposal of specific oil sands related waste fluids, worth over $1,200,000 over the term of the contract, commencing March of 2017.
All tabular amounts are in CDN$ thousands except for per share amounts and where otherwise noted.
ANNUAL OPERATIONAL AND FINANCIAL HIGHLIGHTS
For the years ended December 31, | ||||||||||||
($millions unless noted) | 2016 | 2015 | % Change | 2014 | ||||||||
Total received volume (000's m3) | 381 | 437 | (13 | %) | 420 | |||||||
Revenue | 7.8 | 7.8 | - | 6.8 | ||||||||
Gross margin(1) | 3.2 | 3.6 | (11 | %) | 3.3 | |||||||
Gross margin %(1) | 40 | % | 47 | % | (7 | %) | 48 | % | ||||
Adjusted EBITDA(1) | 1.2 | 1.6 | (27 | %) | 0.9 | |||||||
Adjusted EBITDA(1)as a % of revenue | 15 | % | 21 | % | (6 | %) | 13 | % | ||||
Net loss and comprehensive loss | (4.2 | ) | (2.3 | ) | (83 | %) | (12.8 | ) | ||||
Net loss per share, basic and fully diluted | ($0.03 | ) | ($0.02 | ) | (50 | %) | ($0.13 | ) | ||||
Funds from (used in) operations | 0.2 | 0.6 | (67 | %) | (0.9 | ) | ||||||
Total assets | 34.6 | 37.6 | (8 | %) | 35.7 | |||||||
Net working capital(1) | (6.9 | ) | (- | ) | N/A | 14.9 | ||||||
Long-term liabilities | 8.4 | 7.1 | 18 | % | 12.2 | |||||||
Convertible debentures - long term | 1.9 | 1.4 | 36 | % | 8.3 | |||||||
FOURTH QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS
For the three months ended December 31, | |||||||||
($millions unless noted) | 2016 | 2015 | % Change | ||||||
Total received volume (000's m3) | 87 | 117 | (26 | %) | |||||
Revenue | 1.5 | 2.2 | (32 | %) | |||||
Gross margin(1) | 0.2 | 1.0 | (80 | %) | |||||
Gross margin %(1) | 13 | % | 47 | % | (34 | %) | |||
Adjusted EBITDA(1) | (0.3 | ) | 0.5 | N/A | |||||
Adjusted EBITDA(1)as a % of revenue | (20 | %) | 23 | % | (43 | %) | |||
Net loss and comprehensive loss | (2.5 | ) | (0.6 | ) | N/A | ||||
Net loss per share, basic and fully diluted | ($0.02 | ) | ($0.00 | ) | N/A | ||||
Funds from (used in) operations | (0.6 | ) | 0.3 | N/A |
2016 Full Year Summary
Balance Sheet
Q4 2016 Summary
Credit Facility
Ceiba exited 2016 with approximately $0.4 million in cash and its $5.0 million revolving credit facility undrawn except for an issued letter of credit. The Company was not in compliance with its credit facility's debt service coverage ratio covenant at December 31, 2016 which results in the full amount of its bank debt being classified as current. The non-compliance was the result of lower than expected fourth quarter 2016 operating results and five months of 2015 interest on the Company's 12% debentures that was paid in 2016 and included in the debt service coverage ratio covenant calculation. ATB provided a waiver of its credit facility covenant default on March 7, 2017. If the Company had been in compliance with its credit facility covenant, the long-term portion of its bank debt would have been $4.5 million, reducing the excess of current liabilities over current assets from $6.9 million to $2.4 million.
On January 31, 2017, the Company repaid $1.5 million of convertible debentures at their maturity with drawings from its lower cost credit facility.
Strategic Review
On September 9, 2016 the Company initiated a process to identify, examine and consider a range of strategic alternatives available to the Company with a view to enhance shareholder value. This review remains ongoing while the Company considers certain potential strategic initiatives in view of recent increasing industry activity, which is driving volume increases. The Company does not intend to disclose developments with respect to this process unless and until the Board has approved a definitive transaction or other course of action or otherwise deems that disclosure of developments is appropriate or otherwise required by law. There can be no assurance that this review will result in a transaction or agreement, or if a transaction is undertaken, as to its terms or timing.
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 royalties and operating expenses that include 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 GAAP 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 December 31, | For the year ended December 31, | ||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Total loss and comprehensive loss for the period | (2,544 | ) | (572 | ) | (4,167 | ) | (2,313 | ) | ||||
Add back: | ||||||||||||
Deferred income tax recovery | (122 | ) | - | (122 | ) | - | ||||||
Finance costs | 160 | 242 | 857 | 968 | ||||||||
Depreciation | 507 | 220 | 1,789 | 1,125 | ||||||||
EBITDA | (1,999 | ) | (110 | ) | (1,643 | ) | (220 | ) | ||||
Add back: | ||||||||||||
Share-based compensation | 74 | 142 | 548 | 932 | ||||||||
Accretion | 70 | 43 | 214 | 155 | ||||||||
Loss on impairment of goodwill | - | 401 | - | 401 | ||||||||
Loss on impairment of assets | 1,759 | - | 1,959 | - | ||||||||
Loss on disposal of assets | - | - | - | 43 | ||||||||
Inventory writedown | - | - | 106 | - | ||||||||
Gain on settlement of decommissioning obligations | (199 | ) | (199 | ) | - | |||||||
Transaction costs | 7 | 72 | 179 | 285 | ||||||||
Adjusted EBITDA | (288 | ) | 548 | 1,164 | 1,596 |
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 its ability to settle short-term liabilities with currently available assets.
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 statements pertaining to strategies for remediation of the Kaybob Waste Fluid Facility, the Company's 2017 outlook, and the Company's available liquidity may constitute forward looking statements under applicable securities laws and necessarily involve risks including, without limitation, risks associated with its ability to raise capital, risks associated with obtaining the necessary approvals and rights, risks associated with facility construction and oilfield services operations, risks associated with availability of frac and drilling crews, 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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