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In one sense, this makes NO sense: Aveda Transport and Energy Services (AVE-TSX)(PHNHF) hit record revenue (US$52 million) and record positive cash flow (just over $5 million) this last quarter, Q2 17.
I mean, all this company does is move drill rigs; nothing else. And there are just HALF the drill rigs operating in the US today vs. three years ago—see this chart:
And yet, look at this revenue chart for Aveda–it has dramatically outperformed the increase in rig count off the bottom in the last year–generated more revenue and EBITDA than when oil was $100, gas was $4 and the rig count was 2x what it is now:
How did they do that? That is so counter-intuitive.
And…moving a drill rig only gets you 65-85% of the money it did in 2014.
How have they done it? From a most unlikely source—an acquisition they made in 2015, near the bottom of the market, that saddled them with a lot of debt.
But this acquisition gave them the scale to leverage their competitive edge—safety, and attention to detail…and also leverage the huge rolodex of the new CEO, Ronnie Witherspoon.
They now have hundreds of fairly new pieces of equipment, and they are showing they can win business from the competition—increase market share. But investors haven’t caught on yet in any significant way.
They’re hitting their stride in all markets and all business units. But despite this increase in revenue and EBITDA, utilization on their fleet of equipment is still low at 40%; there’s 90% upside there to 75%.
The Big Change happened when new President Ronnie Witherspoon took over the reins last year. He’s a 20-year veteran of the Oil Field Services (OFS) sector, with a lot of that time in Texas. He has a great rolodex that he has used to drum up business. He was also able to recruit his two VPs who also had a long list of industry contacts, and they have all been winning business. And Aveda’s efficiency and their safety track record means when they get business, they keep it.
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