AKITA Drilling Ltd. (the "Company") announces results for the nine months ended September 30, 2022.
The Company's net income improved to $2,660,000 (0.07 per Class A Non-Voting and Class B Common Shares) in the third quarter of 2022 from a net loss of $6,443,000 (0.16 per Class A Non-Voting and Class B Common Shares) in the same period of 2021. Generating positive earnings in the third quarter of 2022 is a significant achievement for the Company. Strong results in the Company's US division were the primary driver for the improved results. The Company was more active in both Canada with 644 operating days in the third quarter of 2022, compared to 446 operating days in the same period of 2021 and the US with 1,032 operating days in the third quarter of 2022, compared to 723 operating days in the third quarter of 2021. More operating days had a positive impact on results, however, the most significant driver for improved results was the 145% increase in the Company's adjusted operating margin in the United States. Funds flow from operations increased to $8,957,000 in the third quarter of 2022, the highest quarterly funds flow from operations since the first quarter of 2020, which was the last quarter before the pandemic. In the third quarter of 2022, the Company spent $3,020,000 on routine capital, compared to $4,130,000 in the same period of 2021. Quarter end debt balances remained unchanged at $95,000,000 over the first three quarters of 2022.
Linda Southern-Heathcott, AKITA's Executive Chair and Chief Executive Officer stated: "A return to positive earnings marks a milestone that we are very proud of. I would like to thank all of AKITA's employees whose hard work and dedication resulted in this achievement. With fourteen rigs currently operating in the US and nine in Canada, we are preparing for a busy winter drilling season as we continue our efforts to further increase our rig count in Canada".
CONSOLIDATED FINANCIAL HIGHLIGHTS
($Thousands except per share amounts)
For the three months ended September 30,
For the nine months ended September 30,
2022
2021
Change
% Change
2022
2021
Change
% Change
Revenue
53,526
29,906
23,620
79 %
141,471
75,728
65,743
87 %
Operating and maintenance expenses
40,755
25,354
15,401
61 %
111,218
59,267
51,951
88 %
Operating margin
12,771
4,552
8,219
181 %
30,253
16,461
13,792
84 %
Margin %
24 %
15 %
9 %
60 %
21 %
22 %
(1 %)
(5 %)
Net cash from (used in) operating activities
3,727
(1,560)
5,287
339 %
10,163
2,866
7,297
255 %
Adjusted funds flow from operations(1)
8,957
252
8,705
3454 %
18,669
5,027
13,642
271 %
Per share
0.23
0.01
0.22
2200 %
0.47
0.13
0.34
262 %
Net income (loss)
2,660
(6,433)
9,093
141 %
(4,525)
(16,192)
11,667
72 %
Per share
0.07
(0.16)
0.23
144 %
(0.11)
(0.41)
0.30
73 %
Capital expenditures
3,020
4,130
(1,110)
(27 %)
13,065
8,872
4,193
47 %
Weighted average shares outstanding
39,624
39,608
16
0 %
39,614
39,608
6
0 %
Total assets
262,576
241,333
21,243
9 %
262,576
241,333
21,243
9 %
Total debt
94,436
74,549
19,887
27 %
94,436
74,549
19,887
27 %
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this news release for further detail.
United States Drilling Division
$Thousands except per day amounts
For the three months ended September 30,
For the nine months ended September 30,
2022
2021
Change
% Change
2022
2021
Change
% Change
Revenue US
40,537
21,801
18,736
86 %
100,878
57,565
43,313
75 %
Flow through charges(1)
(4,215)
(3,627)
588
16 %
(9,536)
(7,097)
2,439
34 %
Adjusted revenue US(1)
36,322
18,174
18,148
100 %
91,342
50,468
40,874
81 %
Operating and maintenance expenses US
30,691
18,990
11,701
62 %
80,225
46,912
33,313
71 %
Flow through charges(1)
(4,215)
(3,627)
588
16 %
(9,536)
(7,097)
2,439
34 %
Adjusted operating and maintenance expenses US(1)
26,476
15,363
11,113
72 %
70,689
39,815
30,874
78 %
Adjusted operating margin US(1)
9,846
2,811
7,035
250 %
20,653
10,653
10,000
94 %
Margin %(1)
27 %
15 %
12 %
80 %
23 %
21 %
2 %
10 %
Operating days
1,032
723
309
43 %
3,042
2,042
1,000
49 %
Adjusted revenue per operating day(1)
35,196
25,137
10,059
40 %
30,027
24,715
5,312
21 %
Adjusted operating and maintenance expenses per operating day(1)
25,655
21,249
4,406
21 %
23,238
19,498
3,740
19 %
Adjusted operating margin per operating day(1)
9,541
3,888
5,653
145 %
6,789
5,217
1,572
30 %
Utilization(1)
70 %
46 %
24 %
52 %
70 %
44 %
26 %
59 %
Rig count
16
17
(1)
(6 %)
16
17
(1)
(6 %)
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this news release for further detail.
Results in the Company's US operating segment improved significantly in the third quarter of 2022 when compared to the same period of 2021. Activity increased 43% in the third quarter of 2022 to 1,032 operating days compared to 723 in the third quarter of 2021. With the rig count in the US above 750 active rigs, drilling contractors have significantly more pricing power. This increased pricing power has allowed the Company to increase day rates, translating to a 40% increase in adjusted revenue per day up to $35,196 in the third quarter of 2022 from $25,137 in the same period of 2021. Costs have also increased, with prices rising in all categories including labour costs. Adjusted operating and maintenance expenses per day increased 21%. The large increase in revenue per day more than offset the increase in operating and maintenance expenses per day, resulting in the US division's operating margin per day increasing 145% to $9,541 for the third quarter of 2022 and adjusted operating margin increasing to $9,846,000 in the third quarter of 2022 from $2,811,000 in the same period of 2021. At the end of the third quarter, AKITA's US division was operating 14 of its 16 rigs and 100% of the AC rigs in the Company's US fleet.
Canadian Drilling Division
$Thousands except per day amounts
For the three months ended September 30,
For the nine months ended September 30,
2022
2021
Change
% Change
2022
2021
Change
% Change
Revenue Canada
12,988
8,105
4,883
60 %
40,594
18,163
22,431
123 %
Revenue from joint venture drilling rigs
8,458
3,193
5,265
165 %
19,412
11,462
7,950
69 %
Flow through charges(1)
(1,447)
(990)
457
46 %
(3,088)
(2,047)
1,041
51 %
Adjusted revenue Canada(1)
19,999
10,308
9,691
94 %
56,918
27,578
29,340
106 %
Operating and maintenance expenses Canada
10,064
6,364
3,700
58 %
30,993
12,355
18,638
151 %
Operating and maintenance expenses from joint venture drilling rigs
6,647
2,896
3,751
130 %
15,165
10,198
4,967
49 %
Flow through charges(1)
(1,447)
(990)
457
46 %
(3,088)
(2,047)
1,041
51 %
Adjusted operating and maintenance expenses Canada(1)
15,264
8,270
6,994
85 %
43,070
20,506
22,564
110 %
Adjusted operating margin Canada(1)
4,735
2,038
2,697
132 %
13,848
7,072
6,776
96 %
Margin %(1)
24 %
20 %
4 %
20 %
24 %
26 %
(2 %)
(8 %)
Operating days
644
446
198
44 %
1,935
1,093
842
77 %
Adjusted revenue per operating day(1)
31,054
23,112
7,942
34 %
29,415
25,231
4,184
17 %
Adjusted operating and maintenance expenses per operating day(1)
23,702
18,543
5,159
28 %
22,258
18,761
3,497
19 %
Adjusted operating margin per operating day(1)
7,352
4,569
2,783
61 %
7,157
6,470
687
11 %
Utilization(1)
35 %
24 %
11 %
46 %
35 %
20 %
15 %
75 %
Rig count
20
20
-
0 %
20
20
-
0 %
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this news release for further detail.
During the third quarter of 2022, AKITA achieved 644 operating days in Canada, which corresponds to a utilization rate of 35%, compared to 24% (446 days) in the third quarter of 2021 and compared to an industry average of 40% in the third quarter of 2022. This increase in activity had a positive impact on day rates, which in turn improved the Company's adjusted operating margin per operating day by 61% in the third quarter of 2022 over the same period in 2021.
The combination of more operating days and higher revenue per day resulted in a significant increase in adjusted revenue in Canada, which increased to $19,999,000 in the third quarter of 2022, up from $10,308,000 in the third quarter of 2021, a 94% increase. This increase was offset in part by higher adjusted operating and maintenance expenses, which increased to $15,264,000 in the third quarter of 2022 from $8,270,000 in the third quarter of 2021. In the third quarter of 2021 adjusted operating and maintenance costs were reduced by $910,000 (2022 - nil) due to receipt of the Canada Emergency Wage Subsidy (CEWS).
FURTHER INFORMATION
This news release shall be used as preparation for reading the full disclosure documents. AKITA's unaudited interim condensed consolidated financial statements and management's discussion and analysis for the quarter ended September 30, 2022 will be available on the AKITA website (www.akita-drilling.com) or via SEDAR (www.sedar.com) or can be requested in print from the Company.
NON-GAAP ITEMS
This news release references Non-GAAP (Generally Accepted Accounting Principles) items. Revenue per operating day, operating and maintenance expense per operating day, adjusted revenue, adjusted operating and maintenance expense, EBITDA and adjusted funds flow from operations are all considered Non-GAAP items. Management feels that these Non-GAAP items are useful in assessing the Company's performance. These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) and may not be comparable to similar measures used by other companies. For further information, see "Basis of Analysis in this MD&A and Non-GAAP Items" in AKITA's September 30, 2022 Management's Discussion & Analysis.
FORWARD-LOOKING INFORMATION:
Certain statements contained in this news release may constitute forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "plan", "estimate", "expect", "may", "will", "intend", "should", and similar expressions.
Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information.
The Company's actual results could differ materially from those anticipated in this forward-looking information as a result of regulatory decisions, competitive factors in the industries in which the Company operates, prevailing economic conditions (including as may be affected by the COVID-19 pandemic), and other factors, many of which are beyond the control of the Company.
The Company believes that the expectations reflected in the forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.
Any forward-looking information contained in this news release represents the Company's expectations as of the date hereof, and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable securities legislation.
AKITA Drilling Ltd. is a Canada-based intermediate land drilling contractor. The Company and its subsidiaries provide contract drilling services, primarily to the oil and gas industry, in Canada and the United States. The Company owns and operates 35 drilling rigs (33.65 net of joint venture ownership). The Company provides contract drilling services through two geographical divisions: Canada and the United States (US). With a fleet of 20 rigs, the Companyâs Canada division operates in Alberta, British Columbia, Saskatchewan, and from time to time, in the Yukon and the Northwest Territories. The Canadian division operates both wholly owned rigs and rigs that are partially owned by the Company. US division conducts operations with a fleet of 15 rigs and operates in Texas and New Mexico in the Permian Basin.