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Akita Drilling Ltd. Class A Non-Voting Shares

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AKITA's Acquisition of Xtreme Results in Improved Performance in the First Quarter of 2019
AKITA's Acquisition of Xtreme Results in Improved Performance in the First Quarter of 2019

Canada NewsWire

AKITA Drilling Ltd. (TSX: AKT.A)

CALGARY, May 1, 2019 /CNW/ - AKITA's September 11, 2018 acquisition of US based Xtreme Drilling Corp. ("Xtreme") and the strategy to integrate the two companies into one premium pure play drilling company with operations in Canada and the US is proving to be successful.  The realization of corporate synergies is on track to meet targets.  Post-acquisition, AKITA commands a total fleet of 40 rigs, comprised of 17 rigs in its US fleet and 23 rigs in its Canadian fleet.

AKITA Drilling Ltd. (CNW Group/AKITA Drilling Ltd.)

AKITA announced that adjusted funds flow from operations for the quarter ended March 31, 2019 increased 73% to $7,828,000 compared to $4,519,000 in the corresponding quarter of 2018.  AKITA's improved results in the first quarter of 2019, when compared to the same period in 2018, are directly attributable to the Company's acquisition of Xtreme in the fall of 2018, increasing its US fleet from just 2 rigs in Q1 of 2018 to 17 rigs in Q1 of 2019. During the first quarter of 2019 AKITA achieved 1,140 operating days in the US. In Canada, however, results were much weaker than in the prior year as operating days dropped by 47% to 604 days in 2019 compared to 1,133 in 2018. These results translated to a consolidated net loss for the three months ended March 31, 2019 of $1,470,000 (or $0.04 per share) compared to a net loss of $1,912,000 (or $0.11 per share) for the corresponding period in 2018.

Karl Ruud, AKITA's President and Chief Executive Officer stated: "During the quarter, AKITA continued executing its plan to optimize performance, through cost control, operational excellence and continued dedication to safety, across its recently expanded US operational division and existing Canadian operations."

United States Drilling Division

AKITA's 1,140 operating days in the US equated to utilization of 74% in the first quarter of 2019 compared to 43 operating days and 23% utilization in the same period of 2018. The delta between the US results in 2019 compared to 2018 is attributable to the aforementioned Xtreme acquisition. In the first quarter of 2019, 16 of AKITA's 17 US based rigs operated compared to only two rigs operating in 2018 in the same quarter. Revenue from AKITA's US division increased to $34,500,000 in the first quarter of 2019 from $1,150,000 in the same period of 2018. With oil prices increasing from the dramatic decrease in the fourth quarter of 2018, AKITA is optimistic about its investment in its US operations. In 2019, the focus for the Company in the US will be on consolidation of operations into higher demand basins, cost rationalization, improving margins and exploring additional opportunities.

United States Drilling Division Results

For the three months ended March 31, 

2019

2018

$ Thousands (CAD) except per day amounts



Revenue

34,500

1,150

Operating and maintenance expense

21,232

1,686

Operating income

13,268

(536)

Margin %

38%

(47%)




Operating days

1,140

43




Revenue per operating day(1)

30,263

26,744

Operating and maintenance per operating day(1)

18,625

39,209




Utilization (2)

75%

24%




Rig count

17

2


(1)See "Non-GAAP Items". 

(2)Utilization in the US is a weighted average for the year based on the
number of days each rig was physically in the US and owned by the Company.

Canadian Drilling Division

In Canada, results were much weaker than in the prior year as utilization decreased to 29% (604 operating days) in the first quarter of 2019 from 48% (1,133 operating days) in the first quarter of 2018. Revenue in the Canadian division decreased to $18,706,000 in the first quarter of 2019 from $33,322,000 in the first quarter of 2018. Regulated production cuts, pipeline access and political and regulatory uncertainty are all weighing heavily on the Canadian energy industry, which in turn is affecting drilling activity. Activity levels in Canada declined sharply in the fourth quarter of 2018 and this has persisted into the first quarter of 2019.  AKITA does not anticipate a change to this low demand environment without an improvement in the factors mentioned above.

Canadian Drilling Division Results

For the three months ended March 31,

2019

2018

$Thousands except per day amounts



Revenue(1)

18,706

33,322

Operating and maintenance expense(1)

12,778

23,964

Operating income

5,928

9,358

Margin %

32%

28%




Operating days

604

1,133




Revenue per operating day(1)(2)

30,970

29,410

Operating and maintenance per operating day(1)(2)

21,156

21,151




Utilization

29%

48%




Rig count

23

26

(1) Includes AKITA's share of Joint Venture revenue and expenses. See  "Non-GAAP Items"


(2)See "Non-GAAP Items"

 

Corporate

On May 1st, 2019 AKITA declared a second quarter dividend for 2019 of eight and one half cents ($0.085) per Class A Non-Voting and Class B Common Shares.

CONSOLIDATED FINANCIAL HIGHLIGHTS

($ thousands except per share amounts)



For the three months ended March 31, 

2019

2018

Adjusted revenue(1)

53,206

34,472

Adjusted operating and maintenance expenses (1)

34,010

25,650

Operating income

19,196

8,822

Margin %

36%

26%




EBITDA(2)

9,121

4,437

Per share

0.23

0.25




Adjusted funds flow from operations(2)

7,828

4,519

Per share

0.20

0.25




Net loss

(1,470)

(1,912)

Per share

(0.04)

(0.11)




Capital expenditures

1,023

1,685

Dividend declared

3,367

1,525

Weighted average shares outstanding

39,608

17,946




Total assets

407,448

207,911

(1)Includes AKITA's share of Joint Venture revenue and expenses. See "Non-GAAP Items". 

(2)See "Non-GAAP Items". 

 

CONSOLIDATED OPERATIONAL HIGHLIGHTS

For the three months ended March 31, 

2019

2018

Operating days(1)




Canada

604

1,133


United States

1,140

43




Revenue per operating day(1)




Canada(2) 

30,970

29,410


United States

30,263

26,744




Operating and maintenance expense per operating day(1)




Canada(2)

21,156

21,151


United States

18,625

39,209



Utilization (1)




Canada

29%

48%


United States(3)

75%

24%



(1)See "Non-GAAP Items". 

(2)Includes AKITA's share of Joint Venture revenue and expenses. See "Non-GAAP Items". 

(3)Utilization in the US is a weighted average for the year based on the number of days each rig was physically
in the US and owned by the Company.

 

FURTHER INFORMATION

This news release shall be used as preparation for reading the full disclosure documents. AKITA's unaudited interim consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2019 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 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 2019 first quarter 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, 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.

SOURCE AKITA Drilling Ltd.

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INVESTOR INQUIRIES: Darcy Reynolds CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530Copyright CNW Group 2019

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