corporate presentation | april 11,...
TRANSCRIPT
CORPORATE PRESENTATION | APRIL 11, 2017
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. The information contained in this Presentation does not purport to be all-inclusive or to contain all information that prospective investors may require. The information contained inthis Presentation is not intended to provide financial, tax, legal or accounting advice. Prospective investors are encouraged to conduct their own analysis and reviews of the Company, including themerits and the risks involved, and of the information contained in this Presentation. Without limitation, prospective investors should read the Company’s entire audited financial statements andmanagement’s discussion and analysis for 2016 and consider the advice of their financial, legal, accounting, tax and other advisors and such other factors they consider appropriate in investigatingand analyzing the Company.
Forward Looking Statements
This Presentation contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicableCanadian 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 ofwords 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.
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 andassumptions are based on information currently available to Aveda, including information obtained from third party industry analysts and other third party sources. In some instances, materialassumptions and material factors are presented elsewhere in this Presentation in connection with the forward-looking statements. Readers are cautioned that the following list of material factorsand 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; capital expenditure programs and other expenditures by Aveda and its customers; the ability of Aveda to retain and hire qualifiedpersonnel in Canada and the United States; the ability of Aveda to obtain parts, consumables, equipment, technology, and supplies in a timely manner to carry out its activities; the ability of Avedato 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 and the receipt of regulatory approval for proposed financings; currency exchange and interest rates; risks associatedwith foreign 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-looking statementsnecessarily 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 offuture performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks identified by Aveda’s annualinformation form and management discussion and analysis for the year ended December 31, 2016 (the "MD&A") and contained in the short form prospectus thereto filed on SEDAR atwww.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 reflectnew information, subsequent or otherwise.
2
DISCLAIMER
DISCLAIMER (CONT’D)DISCLAIMER (CONT’D)
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 the includedforward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. Certain information contained herein isbased on, or derived from, information provided by independent third-party sources. The Company believes that such information is accurate and that the sources from which it has been obtainedare reliable. The Company cannot guarantee the accuracy of such information, however, and has not independently verified the assumptions on which such information is based. The Company doesnot assume any responsibility for the accuracy or completeness of such information.
Non-International Financial Reporting Standards Measures
This Presentation may contain the terms Adjusted EBITDA and working capital which are defined in the MD&A. These measures are commonly utilized in the oilfield services industry and areconsidered informative for management and stakeholders. Neither working capital nor Adjusted EBITDA have a standardized meaning prescribed 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 Adjusted EBITDA to analyze the operatingperformance of businesses. Adjusted EBITDA as presented is not intended to represent cash provided by operating activities, net earnings or other measures of financial performance calculated inaccordance with IFRS.
3
OUR HISTORY Founded in 1994 as Phoenix Oilfield Hauling Inc. Went public on the TSX Venture Exchange in 2006. Renamed Aveda Transportation and
Energy Services (TSX-V: AVE) Grew significantly through strategic acquisitions and organic expansion, making Aveda the
largest rig moving company in North America; most recently:- 2012: Organic expansion into South Texas (Pleasanton, TX) and West Texas (Midland, TX);
Acquisition of Complete Energy Service Inc. rental assets in Alberta- 2013: Organic expansion into Utica Shale region (NE USA); Acquisition of Belair Rentals assets
in Alberta- 2014: Organic expansion into Mid-Continent (Oklahoma); Acquisitions of M&K rig moving and
rentals assets in North Dakota, and Precision Drilling’s rig moving assets in Texas- 2015: Acquisition of Hodges Trucking Company, L.L.C.’s rig moving assets located across the
USA- 2016: Increased footprint in Permian with addition of second terminal
4
MANAGEMENT TEAM
Ronnie Witherspoon – President and CEO Over 20 years of oilfield industry experience Former President of Superior Well Services and Executive Vice President of Nabors Completion and Production
Services
Bharat Mahajan – VP, Finance and CFO Former CFO of several oilfield service companies, including Wellpoint Systems Inc. and Norex Exploration
Services Inc. Held several positions with Magna International overseeing various international growth initiatives
Tom Halliday – VP, USA Operations Over 40 years of oilfield industry experience Former rig manager for Shell and senior manager with Nabors and Baker Hughes
Les Ovelson – VP, Canada Operations Over 25 years of oilfield industry experience Former COO of ATK Oilfield Transportation and senior manager with KOS Oilfield Transportation
5
BOARD OF DIRECTORSDavid Werklund, Executive Chairman Strong history of founding and growing companies both organically and through acquisitions
‒ Founder and Chairman of Tervita Corporation (previously named CCS Corporation); privatized in 2007 for C$3.5B (largesttrust privatization in Canadian history)
‒ Founder and Executive Chairman of Werklund Capital Corp.
‒ Co-Founder of Concord Well Servicing
2013 Calgary Business Hall of Fame Laureate 2005 Ernst & Young’s Canadian Entrepreneur of the Year
Stefan Erasmus President of Werklund Capital Corporation Former CFO for a public independent power
producer
Doug McCartney Managing Partner, Burstall Winger Zammit LLP Extensive experience in securities and corporate
finance and commercial law
Paul Shelley Consultant for corporate finance, as well as
mergers, acquisitions and divestures Former manager of special loans at RBC
6
Track Record of Growth – Revenue Track Record of Growth – Adjusted EBITDA
Significant Adjusted EBITDA ImprovementH2 2015 vs H2 2016
Exposure to Resilient US Market/Strong Dollar
INVESTMENT HIGHLIGHTS
7(1) Active rigs within 100 miles of Aveda terminals
INDUSTRY TURNAROUND
8(1) Active rigs within 100 miles of Aveda terminal.(2) Baker Hughes rig count as at March 17, 2017.(3) EIA.gov website (U.S. Energy Information Administration).
WHAT ARE THE RIG OPERATORS SAYING
1Nabors Industries Ltd. Press Release October 25, 2016 | 2 Helmerich & Payne Inc. Press Release July 28, 2016 | 3Precision Drilling Corp Press Release October 21, 20169
1
2
2
3
“After a challenging downturn, we areexperiencing SIGNIFICANT UTILIZATION
INCREASES in our Lower 48 market”
Anthony Petrello, Nabors Chairman, President, and CEO
“Even though oil prices have pulled back overthe past several weeks, it is encouraging tostill see signs of OPTIMISM in the market”
John Lindsay, Helmerich & Payne President and CEO
"Customer sentiment has SUBSTANTIALLYIMPROVED.……This improved outlook is evident in the
conversations we are having with customers, but more importantlyin our ACTIVITY INCREASES, recent contract bookings and
IMPROVING PRICING environment”
Kevin Neveu, Precision Drilling President, and CEO
Capitalization Balance Sheet Summary
Historical High Share Price (September 10, 2014) $5.85 Operating Line Available ($MM)(1) $36.1
Current Share Price (March 24, 2017) $0.60 Property and Equipment per Balance Sheet ($MM)(1) $97.6
Tangible Asset Value per Share(1) $0.71 FMV of Property and Equipment ($MM)(4) $115.1
Shares Outstanding (MM)(1) 57.2 Working Capital ($MM)(1) $8.2
Shareholders’ Equity ($MM) (1) $40.9
Debt to Equity (1) 1.6:1
Market Capitalization ($MM)(1) $34.3
Loans and Borrowings ($MM) (1) (2) $32.0 Shareholder Summary
Long Term Note Payable ($MM) (1) (3) $35.9 Werklund Capital Corporation andWerklund Ventures Ltd.
25.0%
Enterprise Value ($MM) $102.2 MM Asset Management Inc.
Invesco Canada Ltd (5)
14.6%
3.4%(1) Calculated by the Corporation as of February 28, 2017.(2) Loans and Borrowings due May 31, 2019. No covenant test as long as excess availability, including supressed availability is greater than $14M. Excess availability at February 28, 2017 is $36.1M.(3) Long Term Note Payable due June 15, 2020. No principal repayment required until maturity date. Bears interest at 9% per annum.(4) Independent appraisal report dated March 31, 2017 by Gordon Brothers Asset Advisors, LLC (dba Gordon Brothers-AccuVal).(5) As further described in the management information circular of Aveda dated September 23, 2016 and filed on SEDAR on October 11, 2016.
CAPITALIZATION SNAPSHOT (TSX-V: AVE)
10
Map Legend
Oil Focused
NGL Focused
(1) Active rigs on or about March17, 2017(source: Baker Hughes)
(2) Aveda’s research suggests thateach rig moves an average of 17times per year at an averagecost of $75K. Based on theNorth American rig count of1045, the estimated value ofthe market is $1.3B
(3) US Corporate Office(4) New Terminal added in Q3 2016
to serve Permian Basin
NORTH AMERICAN OPERATIONS
Permian(308 Rigs)
Williston/Bakken (42 Rigs)
WCSB (270 Rigs)
Eagle Ford(70 Rigs)
Anadarko (59 Rigs)Colorado (25 Rigs)Expansion Opportunity
Houston, TX (3)Houston, TX (3)
Midland, TXMidland, TX
Pleasanton, TXPleasanton, TX
Oklahoma City, OKOklahoma City, OK
Calgary, ABCalgary, AB
Edson, ABEdson, AB
Leduc, ABLeduc, ABWilliston, NDWilliston, ND
There are 1,045 Active Rigs in North America(1) representing an estimated market size of $1.3B(2). Aveda’scurrent terminal locations cover over 75% of the potential North American market
Marshall, TXMarshall, TXHaynesville (37 Rigs)
Marcellus/Utica (64 Rigs)
11
Pecos, TX (4)Pecos, TX (4) LARGEST RIG MOVING COMPANYIN NORTH AMERICA
Williamsport, PAWilliamsport, PACasper, WYCasper, WY
Uinta/Wamsutter(19 Rigs)
BUSINESS UNIT OVERVIEW
12
(1) Terminals in the Marcellus Basin were temporarily suspended in early 2016(2) New terminal added in the Permian Basin in Q3 to increase exposure to growing market
Aveda has a diversified revenue base across all of the major US Basins which in aggregate account forover 90% of the company’s revenue.
A company-wide philosophy based on over 20 years of rig moving experience (the bestpeople, working safely, using the best equipment = industry leading results)
THE “AVEDA WAY”
An IndustryLeader
An IndustryLeader
SAFETY‒ Zero incident rate mentality (TRIR .69 at September 2016)
‒ Among the most advanced/developed safetyprograms in the industry
PEOPLE‒ One of the lowest turn-over rates in the industry
‒ Competitive wages, on-going development opportunities androom for advancement attract top talent
EQUIPMENT‒ Among the most modern fleets in the industry
‒ Strict maintenance policy
13
Blue Chip Customer Base
OILFIELD HAULING OVERVIEW
14
Blue Chip Customer Base
OILFIELD RENTALS OVERVIEW
15
COMPANY PERFORMANCE
16
2
(1) Baker Hughes rig count as at March 17, 2017.(2) Estimated revenue for March 2017.
KEY TAKEAWAYS Well positioned to take advantage of the recovery
– Access to over 75% of growing North American rig count– Exposure to resilient US market
• 92% of Q4 2016 revenue generated in US market– Large footprint in the Permian Basin
• Recently added a second terminal• 36% of Q4 2016 revenue generated in Permian
– Inflection point• Revenue & Adjusted EBITDA on the rise
– Track record for growth
Strong management team– 20 to 40 years of industry experience– Deep rooted customer relationships– David Werklund owns 25%
Focus on reducing leverage– EBITDA contribution– Public markets
17
Bharat Mahajan, CPA, CAVP Finance & Chief Financial Officer
Aveda Transportation and Energy ServicesSuite 300, 435 – 4th Avenue SW
Calgary, AB T2P 3A8(403) 264-5769
Ronnie WitherspoonPresident & Chief Executive Officer
Aveda Transportation and Energy ServicesSuite 1200, 333 N. Sam Houston Parkway E.
Houston, TX 77060(832) 937-5334
CONTACT
Aveda Board Members:
David WerklundExecutive Chairman of Werklund
Capital Corporation
Stefan ErasmusPresident, Werklund Capital
Corporation
Doug McCartneyManaging Partner, Burstall Winger
Zammit LLP
Paul ShelleyIndependent Businessman
18