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Aveda Transportation and Energy Services Provides Further Details on Hodges Trucking Acquisition and Operational Update


CALGARY, AB --(Marketwired - June 17, 2021) - Aveda Transportation and Energy Services Inc. ("Aveda" or the "Company") (TSX VENTURE: AVE), a leading provider of oilfield hauling services and equipment rentals to the energy industry, today provided an operational update on the acquisition (the "Acquisition") of Hodges Trucking ("Hodges").

"This transaction allows us to grow our operational footprint in key markets, expand our blue-chip customer base and better manage pricing pressures as we continue to grow," said Kevin Roycraft, President and CEO of Aveda. "The successful completion of this acquisition is the result of a lot of hard work by the Aveda team, as we were well positioned to take advantage of this incredible opportunity brought on by current market conditions. We intend to take advantage of additional opportunities as they arise, with the intent of becoming the leading rig mover in North America."

Purchase Price and Acquisition Financing

Through the Acquisition, Aveda acquired US$17.5 million of working capital and approximately 900 pieces of rig moving and heavy haul equipment, including approximately 200 haul trucks, 400 trailers, 70 bed/pole trucks, 35 cranes, 40 forklifts/loaders and 160 service vehicles. The purchase price for the Acquisition was US$42.0 million (the "Purchase Price"). US$15.0 million of the Purchase Price was financed through the Company's existing senior credit facility ("Senior Facility") and US$27.0 million was financed by a seller take-back note (the "Note"). The Note is a five-year term debt note with no requirement for early principal repayment. The Note bears interest at 9% per annum, which interest shall be paid quarterly. The Note is secured by a 2ndlien on the Company's fixed assets and accounts receivable.

Asset Allocation and Disposition

Subsequent to the closing of the Acquisition, the Company has sold approximately 350 pieces of Hodges' non-oilfield equipment for approximately US$22.0 million (the "Asset Sale"). The Asset Sale includes approximately 31 cranes, 40 haul trucks, 130 service vehicles (e.g., pickup trucks), 30 loaders/forklifts and 118 trailers. The Company has received approximately US$20.8 million of the sales price in cash and US$1.25 million is currently in escrow to be released over the next 12 months subject to meeting certain milestones.

The Company has retained approximately 50 pieces of non-oilfield equipment, most of which will be immediately deployed into Aveda's operations, including those to be used in Hodges' operations. The retained non-oilfield equipment includes 3 cranes, 26 service vehicles and 7 loaders/forklifts.

The Acquisition included approximately 504 pieces of oilfield equipment, including 154 haul trucks, 71 bed/pole trucks and 279 trailers. The Company will immediately deploy approximately 18 haul trucks, 4 bed/pole trucks and 20 trailers into Aveda's operations. The Company also expects to use a portion of the acquired fleet to upgrade and replace certain existing equipment that may be aging or coming to end of life. The remaining equipment will either be sold offshore to permanently remove excess capacity in the North American rig moving industry or, if the equipment cannot be sold on suitable terms, the Company will keep the equipment and deploy it as market conditions improve. The Company is also actively exploring several organic expansion opportunities in new markets. The Hodges assets will provide a good equipment base for future organic expansion.

Operational Plan

The acquisition of Hodges has allowed the Company to consolidate its largest competitor in the United States. Although Hodges has an excellent safety record, strong customer relationships and talented people, Hodges created considerable pricing pressure for Aveda. The Company believes the consolidation of Hodges into Aveda will help the Company solidify customer relationships and reduce overall pricing pressure.

Hodges' Pearsall, TX branch will be consolidated with Aveda's Pleasanton, TX branch. Hodges' existing branches in Oklahoma City, OK and Marshall, TX will be scaled down to better reflect surrounding area rig counts and market conditions. These branches will be rebranded to reflect Aveda's identity in the coming weeks. Aveda has also transferred additional personnel from Hodges at other locations to fill current vacant positions at the Company. All other Hodges' branches: Elk City and Woodard, OK and Canton, OH have been closed. Overall, the Company expects to retain approximately 85 Hodges' employees. Aveda expects to incur approximately US$5.0 to US$6.0 million in acquisition related costs such as financing fees, severance payments, professional fees, equipment relocation costs, and general administrative costs related to the shutdown of the various Hodges' branches.

Balance Sheet and Debt Structure

The Company incurred US$42.0 million (US$27.0 million from the Note and US$15.0 million from Company's senior secured facility) in debt to complete the Acquisition. Through the US$22.0 million Asset Sale, the Company has recovered over 52% of its initial investment. The Acquisition included US$17.5 million in working capital which the Company expects to convert into cash within 90 to 120 days. Accordingly, the Company expects to receive approximately US$38.8 million in cash (or over 92%) of its initial US$42.0 million investment in the next 90 to 120 days.

"The economics of this acquisition are as good as many that I have seen in my long career," said David Werklund, Executive Chairman of Aveda. "During my time at CCS, we made many transformative and accretive acquisitions, and this is another acquisition that will prove to be successful."

The Company's Senior Facility has no covenant tests as long as excess availability (as defined in the facility agreement) is greater than CAD$25.0 million. The Company borrowed US$15.0 million from the Senior Facility and has repaid US$20.8 million from the Asset Sale. Accordingly, excess availability on the Senior Facility increased as a result of the Acquisition and Asset Sale. Further, the assets retained by Aveda were added to the asset base of the Senior Facility and have further increased excess availability. When the Company receives the expected US$17.5 million from the conversion of the working capital to cash, this will further pay down the Senior Facility and thereby further increase excess availability. As a direct result of the Acquisition, the Company has significantly strengthened its balance sheet and decreased the risk of a covenant test under its Senior Facility.

"This acquisition of Hodges has greatly transformed the capital structure of the Company and simultaneously strengthened our balance sheet," said Bharat Mahajan, Vice-President, Finance and CFO of Aveda. "As we continue to grow in this challenging environment, we have paid down our senior credit facility and increased our borrowing base to allow Aveda even greater flexibility to take on additional opportunities as they arise."

The Company also expects to recover its acquisition related expenses within the first six months of the acquisition through increased business with Hodges' customers and decreased pricing pressure.

Summary and Benefits

As a result of the Hodges acquisition Aveda:

1.  Has acquired one of the Company's most significant competitors.
    Accordingly, Aveda expects to reduce pricing pressure.
2.  Gains access to Hodges' entire customer base. At its peak in 2012,
    Hodges generated US$166.0 million (approximately CAD$200.0 million) in
3.  Adds needed equipment and upgrades its fleet.
4.  Expects to recover over 92% of its initial investment within the next 90
    to 120 days through the Asset Sale and the conversion of US$17.5 million
    working capital into cash. Further, the Company expects to recover all
    of its investment including acquisition related expenses within six
    months through increased revenue from Hodges' customers and reduced
    pricing pressure. Accordingly Aveda expects a 100% payback on its
    investment within six months.
5.  Expects to strengthens its balance sheet and reduce its risk of future
    covenant tests, as a result of repayment of the Senior Facility and the
    addition of tangible assets from Hodges, even though the acquisition was
    financed 100% through debt.
6.  Has expanded its operations by acquiring a new branch in Oklahoma City,
    OK and Marshall, TX and filled vacant positions in various Aveda
    branches by hiring Hodges' people.
7.  Has prevented Hodges' oilfield assets from creating excess capacity in
    the market and potentially enabling new market entrants to create new
    competition within the US rig moving industry.
8.  Achieved all of the items above without diluting current shareholders.

NCIB Update

The Company announced a normal course issuer bid on December 23, 2021 (the "NCIB"). Through the end of March 2015, the Company had purchased approximately 850,000 shares under its NCIB. Aveda has been in a trading blackout due to the release timing of its first quarter 2015 results and subsequently due to the Acquisition. Aveda expects to be out of blackout on Tuesday, June 23, 2021. Subsequently, Aveda intends to resume purchases under its NCIB as it believes its shares are significantly undervalued.

Other Matters

Aveda is actively exploring additional acquisition opportunities. Through this transaction the Company has recognized it has significant growth potential by utilizing the unleveraged value in its asset base. Aveda may seek to refinance the Note potentially with a larger 2nd lien debt facility. Any future refinancing may be done in conjunction with another acquisition.

Under Canadian accounting rules, the Acquisition will likely result in a bargain purchase price gain of between CAD$5.0 and CAD$15.0 million (after accounting for acquisition costs and integration expenses). The Company will be working with its advisors to quantify the gain which will be reported in Aveda's financial statements for the quarter ended June 30, 2021.

Conference Call Dial-In Information

The Company will be hosting a conference call to discuss the Acquisition on Thursday, June 18, 2021 at 9:00 a.m. Eastern Time (ET). President and CEO Kevin Roycraft and Vice-President, Finance and CFO Bharat Mahajan will discuss the Acquisition and then take questions from securities analysts and institutional investors.

To access the conference call by telephone, dial (647) 427-7450 or 1-888-231-8191. A live audio webcast of the conference call will be available at: http://event.on24.com/r.htm?e=1013613&s=1&k=9F5F834F017B5AA2CC78448CDCAC3335

The conference call webcast will be archived and available at: http://www.avedaenergy.com/investors/Conference-Calls/default.aspx until July 31, 2021.

About Aveda Transportation and Energy Services

Aveda provides specialized transportation services and equipment required for the exploration, development and production of petroleum resources in the Western Canadian Sedimentary Basin and in the United States of America principally in and around the states of Texas, Pennsylvania, Oklahoma and North Dakota. Transportation services include both the equipment necessary to move the load as well as a trained, professional driver capable of securing, moving and manipulating the load at its origin and destination. Aveda's rental operations include the rental of well-sites, tanks, mats, pickers, light towers and other equipment necessary for oilfield operations.

Aveda was incorporated in 1994 as a private company to serve the oil and gas industry. In the spring of 2006 the Company went public on the TSX Venture Exchange. Aveda has major operations in Calgary, AB, Sylvan Lake, AB, Leduc, AB, Edson, AB, Marshall, TX, Mineral Wells, TX, Pleasanton, TX, Midland, TX, Williamsport, PA, Buckhannon, WV, Williston, ND, Oklahoma City, OK and Cherokee, OK. Aveda is publicly traded on the TSX Venture Exchange under the symbol AVE. For more information on Aveda please visit www.avedaenergy.com.

This News Release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or 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 News Release contains forward-looking statements relating to: the Company's strategy for integration and consolidation following the Acquisition, future business plans, anticipated benefits and costs of the Acquisition, anticipated accounting treatment of the Acquisition, the Company's plans for debt repayment (including the timing thereof), anticipated future availability under the Senior Facility, and the anticipated resumption of the NCIB . Aveda believes the expectations reflected in such forward-looking statements are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.

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 and 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 News Release in connection with the forward-looking statements. Readers are cautioned that the following list of material factors and assumptions is not exhaustive. Specific material factors and assumptions include, but are not limited to:

--  the ability of Aveda to integrate and consolidate the Hodges operations;
--  the ability of Aveda to retain Hodges customer relationships;
--  the ability of Aveda to collect Hodges' accounts receivable and convert
    working capital to cash;
--  the increased competitiveness of Aveda following the Acquisition and the
    Asset Sale;
--  the ability of Aveda to sell the excess assets from Hodges;
--  the future performance of Aveda's businesses and Hodges business;
--  current business and economic trends;
--  oil and natural gas commodity prices and production levels;
--  capital expenditure programs and other expenditures by Aveda, Hodges and
    their customers;
--  the ability of Aveda to retain and hire qualified personnel;
--  the ability of Aveda to obtain parts, consumables, equipment,
    technology, and supplies in a timely manner to carry out its activities;
--  the ability of Aveda to maintain good working relationships with key
--  the ability of Aveda to market its services successfully to existing and
    new customers;
--  the ability of Aveda to obtain timely financing on acceptable terms;
--  currency exchange and interest rates;
--  risks associated with 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 statements 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 any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risk that Aveda does not obtain the anticipated benefits of the Acquisition, the risk that the actual costs and accounting treatment of the Acquisition are different than expected, the risk that the business plans of Aveda identified herein are delayed or changed for any reason, and the risks identified in Aveda's annual information form and management discussion and analysis for the year ended December 31, 2021 (the "MD&A"), which are available for viewing on SEDAR at www.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 reflect new information, subsequent or otherwise.

Neither 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 accuracy of this release.


For more information, please contact:
Bharat Mahajan, CA
Vice President, Finance and Chief Financial Officer
(403) 264-5769
[email protected]
Source: Aveda Transportation and Energy Services

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