Corporate presentation january 2017 v2

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CORPORATE PRESENTATION | JANUARY 2017

Transcript of Corporate presentation january 2017 v2

Page 1: Corporate presentation   january 2017 v2

CORPORATE PRESENTATION | JANUARY 2017

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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 offer to purchase orsubscribe 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 in connection with, or act as anyinducement 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 contents of this presentation are neither sufficient for, nor intended by the Company to be used in connection with, any decision relating to the purchase or sale of any existing or futuresecurities. The Company does not intend to provide financial, investment, tax, legal, or accounting advice. Persons considering the purchase or sale of any securities of the company should consultwith their own independent professional advisors. This document does not constitute an offer to sell or a solicitation of an offer to buy any of these securities within the United States. Any offer orsolicitation would only be made by means of offering documents (e.g., term sheet, offering memorandum, subscription agreement or similar documents) and only in jurisdictions where permitted bylaw. In which case securities would only be offered to and purchased by eligible investors, and then only in reliance on an exemption from the registration requirement of the United States SecuritiesAct of 1933, as amended (the “U.S. Securities Act”) and exemptions from applicable state securities laws.

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. In particular, this Presentation contains forward-looking statements relating to: future growth; results of operations; operational andfinancial 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; customer commitments; ability to establish and maintain a workingrelationship with third party suppliers; expectations regarding the ability of Aveda to raise capital and to increase its equipment fleet; benefits associated with financial results; activity levels;business strategy; successful integration of structural changes; restructuring plans; organic growth potential; acquisition opportunities 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 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; currency exchange and interest rates; risks associated with foreign operations; changes under governmentalregulatory 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, 2015 (the "MD&A") and contained herein under the heading "Risk Factors". Any forward-lookingstatements 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 new information, subsequent orotherwise.

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DISCLAIMER

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DISCLAIMER (CONT’D)DISCLAIMER (CONT’D)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, sharecapital, 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 including the risks setout in the Company's MD&A and annual information form for the year ended December 31, 2015. FOFI contained in this Presentation was made as of the date of this Presentation and was providedfor the purpose of providing information about management's current expectations and plans relating to the future. The Company disclaims any intention or obligation to update or revise anyforward looking statements or FOFI contained in this Presentation, whether as a result of new information, future events or otherwise, unless required pursuant to applicable securities law. Readersare cautioned that the forward looking statements and FOFI contained in this Presentation should not be used for purposes other than for which it is disclosed herein. The forward lookingstatements 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 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.

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 fairness of theinformation 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 any direct orconsequential loss (howsoever arising) from any use of, or reliance on, this Presentation or otherwise in connection with it. No undertaking, representation, warranty or other assurance, express orimplied, 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 as to the accuracy, completenessor fairness of the information or opinions contained in this Presentation and no responsibility or liability is accepted by any of them for any such information or opinions.

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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, and organic growth into

Florida highway trucking

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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

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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

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Track Record of Growth - Revenue Track Record of Growth – Adjusted EBITDA

Significant Adjusted EBITDA ImprovementQ3 2015 vs Q3 2016

Exposure to Resilient US Market/Strong Dollar

INVESTMENT HIGHLIGHTS

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Rig countDECREASE

40%

Adjusted EBITDAINCREASE

$7M

(1)

(1) Active rigs within 100 miles of Aveda terminals

Q32016

Q32014

Q32015

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INDUSTRY TURNAROUND

8(1) Active rigs within 100 miles of Aveda terminal

(1)

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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

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“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

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Capitalization Balance Sheet Summary

Share Price (September 10, 2014) $5.85 Operating Line Available ($MM)(1) $37.7

Share Price (January 5, 2017) $1.06 Property and Equipment per Balance Sheet ($MM)(1) $101.2

Tangible Asset Value per Share(1) $1.44 FMV of Property and Equipment ($MM)(4) $114.1

Shares Outstanding Diluted (MM)(1) 19.1 Working Capital ($MM)(1) $9.6

Shareholders’ Equity ($MM) (1) $28.1

Debt to Equity (1) 3:1

Market Capitalization ($MM)(6) $20.2

Loans and Borrowings ($MM) (1) (2) $47.8 Shareholder Summary

Long Term Note Payable ($MM) (1) (3) $35.4 Werklund Capital Corp(5) 40.3%

Enterprise Value ($MM) $103.4 Invesco Canada Ltd (5) 10.2%

(1) As of September 30, 2016.(2) Loans and Borrowings due May 31, 2019. No covenant test as long as excess availability, including supressed availability is greater than $20M. Excess availability at September 30, 2016 is $37.7M.(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 September 29, 2016.(5) Publicly available information as at September 23, 2016.(6) Closing price as at January 5, 2017.

CAPITALIZATION SNAPSHOT (TSX-V: AVE)

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Map Legend

Oil Focused

NGL Focused

(1) Active rigs on or aboutDecember 23, 2016 (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 of846, the estimated value of themarket is $1.1B

(3) US Corporate Office(4) New Terminal added in Q3 2016

to serve Permian Basin

NORTH AMERICAN OPERATIONS

Permian(202 Rigs)

Williston/Bakken (32 Rigs)

WCSB (164 Rigs)

Eagle Ford(45 Rigs)

Anadarko (79 Rigs)Colorado (28 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 851 Active Rigs in North America(1) representing an estimated market size of $1.1B(2). Aveda’scurrent terminal locations cover over 70% of the potential North American market

Marshall, TXMarshall, TXHaynesville (34 Rigs)

Marcellus/Utica (51 Rigs)

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Pecos, TX (4)Pecos, TX (4) LARGEST RIG MOVING COMPANYIN NORTH AMERICA

Williamsport, PAWilliamsport, PACasper, WYCasper, WY

Uinta/Wamsutter(19 Rigs)

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BUSINESS UNIT OVERVIEW

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(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

(2)

Aveda has a diversified revenue base across all of the major US Basins which in aggregate account forover 90% of the company’s revenue.

(1)

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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

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Blue Chip Customer Base

OILFIELD HAULING OVERVIEW

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One of the largest and youngestfleets in the industry:1,332 pieces of equipment6 years – average age of keypower units (tractors/bedtrucks/cranes)

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Blue Chip Customer Base

OILFIELD RENTALS OVERVIEW

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Over 1,100 Pieces ofmodern, well-maintainedequipment

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COMPANY PERFORMANCE

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Rig counts DOWN 40%in the same period

(1) Estimated December Revenue.

NewManagement

Team

NewManagement

Team

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KEY TAKEAWAYS Well positioned to take advantage of the recovery

– Access to over 70% of growing North American rig count– Exposure to resilient US market

• 92% of Q3 2016 revenue generated in US market– Large footprint in the Permian Basin

• Recently added a second terminal• 33% of Q3 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 40%

Focus on reducing leverage– EBITDA contribution– Public markets

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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

[email protected]

Ronnie WitherspoonPresident & Chief Executive Officer

Aveda Transportation and Energy ServicesSuite 1200, 333 N. Sam Houston Parkway E.

Houston, TX 77060(832) 937-5334

[email protected]

CONTACT

Aveda Board Members:

David WerklundExecutive Chairman of Werklund

Capital Corporation

Stefan ErasmusPresident, Werklund Capital

Corporation

Doug McCartneyPartner, Burstall Winger Zammit LLP

Paul ShelleyIndependent Businessman

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