aveda energy investor presentation june 2014
TRANSCRIPT
Corporate Presentation | June 2014
The information contained in this corporate presentation (the "Presentation") is based on public information and Aveda Transportation and Energy Services Inc.'s ("Aveda" or the"Company") information. This Presentation does not constitute, or form a part of, and should not be construed as any offer or invitation to sell, allot or issue, or any solicitation of any offerto purchase or subscribe for, any securities, nor shall it (or any part of it or anything contained or referred to in it) or the fact of its distribution form the basis of, or be relied upon inconnection with, or act as any inducement in relation to a decision to purchase or subscribe for or to enter into, any contract or commitment whatsoever for securities in any jurisdiction.
The securities of Aveda have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the "1933 Act"), or the securities laws of any state.Additionally, this Presentation is not for release, publication or distribution in, into or from the United States of America.
This Presentation contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning ofapplicable Canadian securities laws. All statements other than statements of 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 Presentation contains forward-looking statements relating to: future growth;results of operations; operational and financial performance; projected capital expenditures and commitments and the financing thereof; benefits derived from capital expenditures;expansion opportunities; increases in revenue; equipment delivery and deployment dates; effect of and ability to complete rebranding; geographic allocation of equipment; customercommitments; ability to establish and maintain a working relationship with third party suppliers; expectations regarding the ability of Aveda to raise capital and to increase its equipmentfleet; benefits associated with financial results; activity levels; business strategy; successful integration of structural changes; restructuring plans; organic growth potential; acquisitionopportunities and benefits and availability of insurance coverage.
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 factorsand 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 Presentation in connection with the forward-looking statements. Readers are cautioned that the following list ofmaterial factors and assumptions is not exhaustive. Specific material factors and assumptions include, but are not limited to: the performance of Aveda’s businesses, including currentbusiness and economic trends; oil and natural gas commodity prices and production levels; capital expenditure programs and other expenditures by Aveda and its customers; the ability ofAveda to retain and hire qualified personnel in Canada and the United States; the ability of Aveda to obtain parts, consumables, equipment, technology, and supplies in a timely manner tocarry 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 retain customers post-acquisitions; the ability of Aveda to obtain timely financing on acceptable terms; currency exchange and interest rates; risks associated withforeign operations; changes under governmental regulatory regimes and tax, environmental and other laws in Canada and the United States; and a stable competitive environment.
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-lookingstatements 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 anyprojections 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 byAveda’s annual information form and management discussion and analysis for the year ended December 31, 2013 (the "MD&A") and contained herein under the heading "Risk Factors".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 newinformation, subsequent or otherwise.
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DISCLAIMER
Future-Oriented Financial Information
This Presentation also contains future-oriented financial information and financial outlook information (collectively, "FOFI") about prospective results of operations, future net revenue,share capital, cash flows, and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs includingthe risks set out in the Company's MD&A and annual information form for the year ended December 31, 2013. FOFI contained in this Presentation was made as of the date of thisPresentation and was provided for the purpose of providing information about management's current expectations and plans relating to the future. The Company disclaims any intention orobligation to update or revise any forward looking statements or FOFI contained in this Presentation, whether as a result of new information, future events or otherwise, unless requiredpursuant to applicable securities law. Readers are cautioned that the forward looking statements and FOFI contained in this Presentation should not be used for purposes other than forwhich it is disclosed herein. The forward looking statements and FOFI contained in this Presentation are expressly qualified by this cautionary statement.
The forward-looking statements contained in this Presentation are made as of the date on the front page and the Company assumes no obligation to update publicly or to revise any of theincluded forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. Certain informationcontained herein is based on, or derived from, information provided by independent third-party sources. The Company believes that such information is accurate and that the sources fromwhich it has been obtained are reliable. The Company cannot guarantee the accuracy of such information, however, and has not independently verified the assumptions on which suchinformation is based. The Company does not assume any responsibility for the accuracy or completeness of such information.
Non-International Financial Reporting Standards Measures
This Presentation may contain the terms EBITDA (earnings before interest, taxes, depreciation and amortization) and working capital which are defined in the MD&A. These measures arecommonly utilized in the oilfield services industry and are considered informative for management and stakeholders. Neither working capital nor EBITDA have a standardized meaningprescribed by international financial reporting standards ("IFRS") and therefore Aveda's calculations may not be comparable with the calculation of similar measures for other entities.Management uses EBITDA to analyze the operating performance of businesses. EBITDA as presented is not intended to represent cash provided by operating activities, net earnings or othermeasures of financial performance calculated in accordance with IFRS.
This Presentation does not constitute a recommendation regarding the securities of Aveda. No reliance may be placed for any purpose whatsoever on the completeness, accuracy or fairnessof the information or opinions contained in this Presentation nor is any responsibility or liability accepted for any errors or misstatements in, or omissions from, this Presentation or anydirect or consequential loss (howsoever arising) from any use of, or reliance on, this Presentation or otherwise in connection with it. No undertaking, representation, warranty or otherassurance, express or implied, is made or given by or on behalf of Aveda, or any of its respective directors, officers, partners, employees, agents, affiliates or advisers or any other person asto the accuracy, completeness or fairness of the information or opinions contained in this Presentation and no responsibility or liability is accepted by any of them for any such informationor opinions.
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DISCLAIMER (CONT’D)
Oilfield Hauling Oilfield Rentals Matting Tanks Light towers Shacks
Rig moving Heavy hauling Hot shot services
Aveda Transportation and Energy Services (“Aveda” or the “Company”) is a growing provider of specialized oilfieldhauling and rentals to the US and Western Canadian oil and gas industry
Aveda was founded in 1994, went public in 2006 and was recapitalized in 2011
The Company is well positioned to take advantage of attractive organic and acquisition growth opportunitiesthroughout North America
Multiple cross-over business opportunities achieved through oilfield hauling and rental business units
COMPANY OVERVIEW
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ManagementDavid Werklund – Executive Chairman Has been the Chairman of Aveda since 2006 and served as Interim
President and CEO of Aveda from September 2011 to November2012. Appointed as Executive Chairman in November 2012
Began career in 1965 at Shell Canada as a Production Operator Founder and Chairman of the Board of Directors of CCS
Corporation (now Tervita Corporation) Co-Founder of Concord Well Servicing Founder and Executive Chairman of Werklund Capital Corporation The 2005 Ernst & Young's Canadian Entrepreneur of the Year The 2013 Calgary Business Hall of Fame Laureate
Kevin Roycraft - President and CEO Joined Aveda in November 2012 More than 20 years of Transportation Industry Experience Former Vice-President of Operations for Liquid Transport Corp.
(one of North America’s largest bulk chemical and oiltransportation company)
Bharat Mahajan – Vice-President, Finance and CFO Joined Aveda in October 2011 Held several positions with Magna International overseeing
various international growth initiatives Former CFO of several oilfield service companies, including
Wellpoint Systems Inc. and Norex Exploration Services Inc.
Board MembersStefan Erasmus President of Werklund Capital Corporation Director of several private companies and charitable organizations Former Managing Director of Resources Global Professionals
Doug McCartney Partner of Burstall Winger Zammit LLP Practices in the areas of securities and corporate finance and
corporate and commercial law Director or officer of several private companies
Paul Shelley President of Convinco Financial Ltd. Former Senior Vice President, Corporate Development at Kos Corp.
Investments Ltd.
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MANAGEMENT AND BOARD OF DIRECTORS
Historical Shareholder Returns CCS Selected Historical Acquisitions
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David Werklund founded CCS Corporation (now Tervita Corporation) in 1984 and built it largely through theconsolidation of several oilfield services companies and organic growth
CCS privatized in 2007 for approximately C$3.5 billion (the largest Trust privatization in Canadian history)
MANAGEMENT TRACK RECORD
Source: FactSet
CAGR Total Return
CCS 24% 2490%CAGR Total Return
CCS 24% 2490%
Capitalization (1) Balance Sheet Summary(1)
Share price (May 22, 2014) $4.22 Operating Line Available ($mm) $36.7
Shares Outstanding Basic (mm) 19.9 Property and Equipment ($mm) $76.3
Outstanding Stock Options (mm) 1.1 Working Capital ($mm) $16.5
Shares Outstanding Fully Diluted (mm) 21.0 Total Assets/Tangible Assets ($mm) $142.3/$114.1
FD Market Capitalization ($mm) $88.6
Net Debt ($mm)
Loans and Borrowings $38.1 Shareholder Summary(1)
Cash(1)(2) ($4.3) Werklund Capital Corp 33.3%
Total Net Debt ($mm) $33.8 Other Insiders 1.2%
Enterprise Value ($mm) $122.4 Total Insiders 34.5%
CAPITALIZATION SNAPSHOT
(1) At March 31, 2014(2) Includes potential cash from exercise of all options of $3.4 million
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161
187
Permian 219
24Barnett
87
Williston/Bakken
WCSB
(1) ) Active rigs on or about April 25 in relevant year; as per Baker Hughes
Marcellus
Aveda has a growth plan that isfocused on targeting oil/liquid richweighted basins across North America
Based on a recent market analysis,Aveda estimates each rig movesapproximately 1.4 times per month or17 times per year (approx. 33,286moves per year based on late April2014 rig count)
Aveda’s reputation, customerrelationships and quality service resultsin high utilization of its transportationequipment
Approximately 1,958 Active Rigs in North America(1)
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OILFIELD HAULING MARKET
Eagle Ford
North American ActiveLand Rig Count(1)
2013 1,800
2012 2,011
542
Northern Texas/Oklahoma259
36Utica
Active Region Prior to 20122012 Organic Expansion2013 Organic ExpansionM&K AcquisitionExpansion Opportunity
Oil Focused
NGL Focused
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NORTH AMERICAN OPERATIONS
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Recently acquired oilfield hauling andequipment rentals operations inWilliston, ND (“M&K Acquisition”)
Recently acquired oilfield rentals operation inEdson, AB (“Belair Acquisition”)
Fourteen offices located in the heartof the key North American resource plays
Significant expansion opportunities,especially in U.S. markets
Flexible workforce can be transferred crossborder to high activity areas
Experienced team of approximately 390employees
LEDUC
CALGARY (1)
MIDLAND
PLEASANTON
SLAVE LAKE
MINERAL WELLS
WILLIAMSPORT
Geographic Locations
Fixed Asset Allocation (1)
(1) Based on total equipment Net Book Value atMarch 31, 2014
SYLVAN LAKE
BUCKHANNON
EDSON
WILLISTON
CurrentAveda
RecentAcquisitions
69%
31%
US CanadaHOUSTON(2)
(1) 3 offices in Calgary area – Heavy Haul, Service, and corporate headquarter(2) US corporate headquarter
OILFIELD HAULING OVERVIEW
Modern, well maintained current fleet of 846 pieces ofequipment (276 power units)
Current employees of 387 employees (181 operators) Fragmented industry makes for attractive consolidation
opportunities Primary competitors include Mullen, Monster Heavy
Haulers, Flint and regional specialty haulers
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Equipment Composition in Hauling Fleet
Blue Chip Customer Base
0 50 100 150 200 250 300 350 400 450
Cranes
Bed Truck
Picker/Loader
Tractor
Miscellaneous
Trailer
Pre-acquisition Aveda M&K Acquisition
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Competitor Aveda
40 mile rig move – Marcellus Shale (1)
The Result: 11% price premium for Aveda 64% reduction in rig downtime for customer
(1) 1,250 hp, jackknife triple rig, ~ 70 loads
4 days11 days
Aveda has outperformed its competitors as a result of: Newer, more specialized equipment Experienced personnel Planning and communications Ability to meet industry demands for heavier equipment and larger loads
OILFIELD HAULING CASE STUDY
OILFIELD RENTALS OVERVIEW
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Modern, well maintained equipment with over 1,450pieces in the rental fleet after the Belair and M&KAcquisitions
Plan to build critical mass through the acquisition ofcompetitors with similar or complementary equipment
Typical acquisition multiples identified at 3.0x to 3.5xEBITDA
Equipment Composition in Rental Fleet
Blue Chip Customer Base
0 50 100 150 200 250 300 350 400 450
Well-site Shacks/Trailers
Shale Bins
Light Towers
Miscellaneous
Racks
Rig Mats
Tanks
Pre-acquisition Aveda Belair Acquisition M&K Acquisition
GROWTH STRATEGY
Capital Expenditure Program Completed capital expenditure of $6.3 million in 2013. $12.0 - $15.0 million capital
expenditures expected for 2014Organic Growth Initiatives Existing Customers
Rig moving and ancillary equipment (e.g. tanks, trailers, cranes, etc.) Implement transportation management systems (e.g. GPS, satellite communications)
Expansion into New Areas 1 new branch in 2013 (Buckhannon, WV); 2 new branches in 2012 (Midland and
Pleasanton, TX) Target high activity resource plays focused on oil and NGL exploration Considering potential exclusivity agreements with established operators to mitigate risk
of organic expansionGrowth Through Acquisitions Acquire complementary fleets in both new and existing geographies Typical acquisition multiples of 3.0x to 3.5x EBITDA Evaluating potential acquisitions of various sizes in high activity regions
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FINANCIAL PERFORMANCE: REVENUE
• Consistent annual revenue growth:
– 51% overall revenue growth in the first quarter of 2014 vs. 2013
– Compound annual growth rate of 27.2% between 2009 and 2013
Annual Revenue ($MM) Revenue by Geography
First Three Months Revenue ($MM) – 51% growth
Q1 2014
Q1 2013
Growingexposure tothe resilientU.S. market
23.5
35.4
15.020.025.030.035.040.0
Q1 2013 Q1 2014
39.8
72.2 83.3 88.7
0.020.040.060.080.0
100.0
2010 2011 2012 2013 29%
71%
42%
58%
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FINANCIAL PERFORMANCE: EBITDA
• First three months of 2014 EBITDA of $6.6million, an increase of $2.3 million (53%)compared to 2013, reflecting:
– Higher utilization across North America
– Premium pricing in key resource plays
– Operational efficiencies resulting inincreased margins
• Compound annual growth rate of 63.6%between 2009 and 2013
Annual EBITDA ($MM)
First Three Months EBITDA ($MM) – 53% growth
4.3
6.6
2.0
3.0
4.0
5.0
6.0
7.0
Q1 2013 Q1 2014
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9.8
15.0
6.0
8.0
10.0
12.0
14.0
16.0
2012 2013
RECENT ACHIEVEMENTS SUMMARY
Moved US Corporate Office from Mineral Wells, TX to Houston, TX
Closed Belair (November 8, 2013) and M&K acquisitions (January 31, 2014)
Related to the M&K acquisition, completed $23.0 million Common Shares boughtdeal private placement financing
Increased senior credit facility from $50.0 million to $75.0 million; reduced interestrate by 50 bps
Converted $4.7 million convertible debenture into equity
Opened new satellite branch in Buckhannon, WV to serve the Utica Basin
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INVESTMENT HIGHLIGHTS
Proven management team with a history of value creation
Solid industry fundamentals supported by continued strong oil prices
Strong balance sheet and cash flow generation
Significant growth opportunities across emerging oil-weighted resource plays
Organic growth
Acquisitions
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CONTACT
Bharat MahajanChief Financial Officer
Aveda Transportation and Energy ServicesSuite 300, 435 – 4th Avenue SW
Calgary, ABT2P 3A8
(403) [email protected]
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