Ceiba Energy Services : May 16, 2016 – Ceiba Energy Services Announces First Quarter 2016 Financial Results and Operational Update

044009ab-9aef-4af1-a215-2e6fe2b3c13e.pdf Ceiba Energy Services Announces First Quarter 2016 Financial Results and Operational Update

CALGARY, ALBERTA- (May 16, 2016) - Ceiba Energy Services Inc. ("Ceiba" or the "Company") (TSXV: CEB) is pleased to announce its first quarter 2016 financial results highlighted by an adjusted EBITDA of $35 thousand, an increase of 13% from the first quarter of 2015. Ceiba continues to be well positioned to execute its business plan and capitalize on growth opportunities. The Company has funded the completion of the Obed and Athabasca facilities in the first quarter of 2016. With cash on hand and its available credit facility, Ceiba has adequate liquidity for the repayment of its convertible debentures when they mature. Ceiba has filed its Financial Statements and related Management's Discussion and Analysis for the quarter ended March 31, 2016 on the Company's profile at www.sedar.com.

The Company's annual general and special meeting is scheduled for May 17, 2016 at 10:00 a.m. Calgary time at the Eau Claire Place II conference room, second floor, 521 - 3rd Avenue S.W., Calgary, Alberta, T2P 3T3.

Ceiba continues to execute its growth strategy and improve its financial performance through a challenging period in the oil and gas industry which started in Q4 2014.

In Q1 2016, the Company continued capital development to expand services in areas where demand is still strong:

• Opened the Obed produced water facility in late February 2016;

• Opened the Athabasca waste water facility in late March 2016; and

• Continued the development of the Kaybob waste water facility which is expected to start construction in the second half of 2016.

  Ceiba did experience challenges as a result of the industry slowdown which has offset some of these developments, including the reduced drilling, early spring break-up which began in late February, and increased production shut-ins by customers, leading to the impact of overall volume and product mix at existing sites.

  Despite the challenges faced by Ceiba and the 30% decrease in volumes year-over-year, revenue decreased only 1% and gross margins decreased only 3%. Adjusted EBITDA increased 4 thousand in Q1 2016 compared to Q1 2015 as a result of the Company's continued focus on cost control to achieve strong gross margins and reduce general and administrative expenses. During Q1 2016, executives and senior managers at the Company voluntarily reduced salaries by 10%.

  All tabular amounts are in CDN$ thousands except for per share amounts and where otherwise noted.

  FIRST QUARTER OPERATIONAL AND FINANCIAL HIGHLIGHTS For the three months ended,

  ($000's unless noted)	March 31, 2016	March 31, 2015	2016 vs. 2015
  Total received volume (000's m3)	77	110	(30%)
  Revenue	1,598	1,613	(1%)
  Gross margin(1)	611	632	(3%)
  Gross margin %(1)	38%	39%	(1%)
  Adjusted EBITDA(1)	35	31	13%
  Total assets	36,173	35,116	3%
  Net working capital(1)	(3,680)	13,125	N/A
  Convertible debentures	8,683	8,341	N/A
  Net loss and comprehensive loss	(808)	(885)	N/A
  Net loss per share, basic and fully diluted	($0.01)	($0.01)	N/A
  Funds (used in) operations	(212)	(228)	N/A

  (1) Refer to "NON-GAAP MEASURES AND OPERATIONAL DEFINITIONS" for additional information

  2016 Q1 operating results

• Revenue in Q1 2016 of $1,598 thousand was relatively flat compared to Q1 2015. The year- over-year volume reduction was offset by higher recovered oil revenue and a product mix which drove higher average prices in Q1 2016 compared to Q1 2015.

• Total received fluid volumes into the Company's facilities decreased 30% compared to Q1 2015. Excluding the Kinsella terminalling facility, which was temporarily closed in February, 2016, Q1 2016 volumes decreased 12% compared to Q1 2015. (Excluding Kinsella, revenue increased 2% in Q1 2016 compared to Q1 2015.) Combined volumes at Silver Valley and Gordondale were relatively flat year-over-year. Declines at Chamberlain and Central Alberta were partially offset by new volumes at Obed which opened in late February 2016 and Athabasca which opened in late March 2016.

• The Company had gross margin in Q1 2016 of $611 thousand (38% of revenue) compared to Q1 2015 of $632 thousand (39% of revenue). The decrease of $21 thousand (3%) compared to Q1 2015 is attributable to the decreased volumes leading to lower revenue.

• Adjusted EBITDA was $35 thousand in Q1 2016, marking nine consecutive quarters of positive Adjusted EBITDA. Lower gross margins in Q1 2016 was more than offset by lower general and administrative expenses in Q1 2016 compared to Q1 2015.

• Ceiba recorded a loss before income tax of $808 thousand in Q1 2016 compared to a loss before income tax of $885 in Q1 2015, an improvement of $77 thousand.

  Balance sheet highlights

• Ceiba ended Q1 2016 with $4.5 million in cash and cash equivalents and $3.7 million of negative net working capital.

• Ceiba entered into a revised $15 million credit facility commitment letter with Alberta Treasury Branches ("ATB") on March 7, 2016 to ensure sufficient cash is available to fund the convertible debenture repayment obligations at maturity, future operations and capital requirements.

FUTURE PLANS AND OUTLOOK

In the face of the current commodity price environment, which is producing headwinds for the Company and the industry in general, Ceiba is actively pursuing operational and investment activities that further the Company's long term strategic goals. Ceiba's strategies to continue growing include working closely with current and potential new customers to reduce their overall fluid disposal costs, continued operational excellence at its facilities to protect gross margins and investment in new facilities to meet localized demand.

Ceiba opened the Obed disposal facility in late February 2016 to receive Class II fluids from third parties. The Obed facility has met management's volumes expectations and is near the full capacity of the surface equipment. Management is assessing the economics of expanding this facility.

The Company opened its Athabasca waste fluid facility in late-March 2016 and received a regulatory amendment to its operating parameters in April 2016 which allows the facility to better meet the needs of its customers. The Athabasca facility has attracted new customers and product types to Ceiba which the Company was not able to handle at other facilities.

The Athabasca facility is approximately 250 kilometres south of the forest fires in the Fort McMurray region which started affecting oil sands operations and the Municipality of Wood Buffalo in early May 2016. The facility is fully operational and receiving volumes and the impact on volumes to date has been relatively minor. Ceiba expects that as oil sands operations return to normal, the Athabasca facility will ramp up during 2016 and contribute strongly to the Company's revenue and gross margin growth.

In Q4 2015, Ceiba completed drilling and completion activities for a new disposal well in the Kaybob region. The Company continues to move forward development plans and expects to initiate construction in late 2016 to open a new waste water facility in this active market area by early 2017.

In January 2016, Ceiba temporarily stopped its blending operations at its Kinsella facility due to a lack of suitable heavy oil feedstock. Ceiba is actively looking for new feedstock and considering other alternatives for this non-core asset. While Kinsella contributed approximately 25% of the Company's 2015 received volumes, it had a minimal impact to the Company's gross margins due to the nature of its blending operations and our profit sharing arrangement with our marketing partner at the facility.

Ceiba intends to maintain a conservative balance sheet in the current low commodity price environment. Ceiba has completed the development of its Athabasca waste fluid disposal facility and Obed produced water disposal facility and remains working capital positive before taking into consideration the repayment of $7.3 million of convertible debentures due July 31, 2016 and $1.5 million of convertible debentures due January 31, 2017. Ceiba intends to repay or refinance its 12% convertible debentures with cash and lower interest rate debt which may include amounts available under its bank credit facility. The development of future facilities will be subject to analysis of expected returns meeting the Company's rate of return targets and availability of appropriate financing.

The Company continues activities to acquire suitable locations for new facilities in under serviced or constrained markets. Ceiba continues to assess and evaluate acquisition opportunities that are both complimentary to the existing asset base and are accretive to the five-year business plan.

Demand for the Company's services is dependent on oil and gas production in areas where it has facilities. Uncertainty in oil, gas and natural gas liquids pricing may influence capital spending decisions relating to production and ultimately demand for the Company's services. Demand for the Company's services is also affected by seasonal variations in the Western Canadian Sedimentary Basin. Any adverse changes in the global economy/markets may impact the oil prices and hence the oilfield industry in the region. This may impact the ability of the Company to raise capital to support its future growth plans and working capital needs.

NON-GAAP MEASURES AND OPERATIONAL DEFINITIONS

Certain supplementary measures in this MD&A do not have any standardized meaning as prescribed under GAAP and, therefore, are considered non-GAAP measures. These measures are described and presented in order to provide information regarding the Company's financial results, liquidity and its ability to generate funds to finance its operations. These measures are identified and presented, where appropriate, together with reconciliations to the equivalent GAAP measure. However, they should not be used as an alternative to GAAP measures because they may not be consistent with calculations of other companies. These non-GAAP measures, and certain operational definitions used by the Company, are further explained below.