AKITA announces second quarter results
Aug 4, 2020
CALGARY, AB, Aug. 4, 2020 /CNW/ - AKITA Drilling Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. (the "Company") announces results for the six months ended June 30, 2020. The Company's net loss of $5,221,000 in the second quarter of 2020 was consistent with the second quarter of 2019 ($5,067,000), as was adjusted EBITDA of $2,985,000 in the second quarter of 2020 compared to $3,179,000 in the same period of 2019. Although the Company's net loss and adjusted EBITDA were in-line with the prior year, activity in the quarter was down significantly.
In March 2020, the World Health Organization declared a global pandemic related to COVID-19. To date, the COVID-19 related economic slowdown has resulted in significant declines and volatility in the stock markets as well as steep reductions in both global oil demand and prices. There remains significant uncertainty surrounding the future impact of COVID-19 on demand and prices for the Company's drilling services.
The impact of COVID-19 on demand for drilling services is clearly reflected in the reduced drilling activity level in the second quarter. Operating days decreased 50% to 643 for the second quarter of 2020 from the second quarter of 2019. This decrease in activity had a corresponding impact on the Company's revenue. AKITA's management mitigated the economic impact of the pandemic environment in the second quarter through significant cost cutting including: reducing corporate overhead through a reduction in staffing levels, wage reductions from 5% to 50%, working with our vendors to reduce and minimize expenses, and receiving government subsidies. This mitigation ensured that despite activity decreasing 50% and revenue decreasing 33%, quarter-over-quarter, adjusted EBITDA and net loss remained relatively constant.
As disclosed on July 20, 2020, the Company's credit facility has been amended to include five quarters of covenant relief, from and including the second quarter of 2020 to and including the second quarter of 2021. This covenant relief period will allow the Company access to the liquidity it may require.
Karl Ruud, AKITA's President and Chief Executive Officer stated: "We have adjusted our operations to cope with the current environment to ensure AKITA is well positioned to participate in the industry recovery, when it happens."
CONSOLIDATED FINANCIAL HIGHLIGHTS
($Thousands except per share amounts) | For the three months ended June 30, | For the six months ended June 30, | ||||||
2020 | 2019 | Change | % Change | 2020 | 2019 | Change | % Change | |
Revenue | 26,359 | 39,119 | (12,760) | (33%) | 79,931 | 91,461 | (11,530) | (13%) |
Operating and maintenance | 20,874 | 32,004 | (11,130) | (35%) | 62,066 | 68,871 | (6,805) | (10%) |
Operating income | 5,485 | 7,115 | (1,630) | (23%) | 17,865 | 22,590 | (4,725) | (21%) |
Margin % | 21% | 18% | 3% | 17% | 22% | 25% | (3%) | (12%) |
Adjusted EBITDA(1) | 2,985 | 3,179 | (194) | (6%) | 14,622 | 12,301 | 2,321 | 19% |
Per share | 0.08 | 0.08 | - | 0% | 0.37 | 0.31 | 0.06 | 19% |
Adjusted funds flow from | 2,099 | 1,516 | 583 | 38% | 12,253 | 9,300 | 2,953 | 32% |
Per share | 0.05 | 0.04 | 0.01 | 25% | 0.31 | 0.23 | 0.08 | 35% |
Net loss | (5,221) | (5,067) | (154) | (3%) | (57,478) | (6,536) | (50,942) | (779%) |
Per share | (0.13) | (0.13) | - | 0% | (1.45) | (0.17) | (1.28) | (753%) |
Capital expenditures | 1,612 | 6,759 | (5,147) | (76%) | 5,139 | 7,782 | (2,643) | (34%) |
Dividend declared | - | 3,367 | (3,367) | (100%) | - | 6,734 | (6,734) | (100%) |
Weighted average shares | 39,608 | 39,608 | - | 0% | 39,608 | 39,608 | - | 0% |
Total assets | 292,819 | 391,162 | (98,343) | (25%) | 292,819 | 391,162 | (98,343) | (25%) |
Total debt | 79,650 | 84,271 | (4,621) | (5%) | 79,650 | 84,271 | (4,621) | (5%) |
(1) Non-GAAP Items | ||||||||
CONSOLIDATED OPERATIONAL HIGHLIGHTS
For the three months ended June 30, | For the six months ended June 30, | |||||||
2020 | 2019 | Change | % Change | 2020 | 2019 | Change | % Change | |
Operating days | ||||||||
Canada | 99 | 274 | (175) | (64%) | 712 | 878 | (166) | (19%) |
United States | 544 | 1,008 | (464) | (46%) | 1,652 | 2,148 | (496) | (23%) |
Revenue per operating day(1) | ||||||||
Canada(2) | 50,505 | 31,518 | 18,987 | 60% | 33,239 | 31,141 | 2,098 | 7% |
United States | 39,342 | 31,874 | 7,468 | 23% | 37,097 | 31,019 | 6,078 | 20% |
Operating and maintenance | ||||||||
Canada(2) | 41,061 | 21,515 | 19,546 | 91% | 25,538 | 21,268 | 4,270 | 20% |
United States | 31,031 | 22,743 | 8,288 | 36% | 29,007 | 20,557 | 8,450 | 41% |
Utilization | ||||||||
Canada | 5% | 13% | (8%) | (62%) | 17% | 21% | (4%) | (19%) |
United States | 33% | 65% | (32%) | (49%) | 51% | 70% | (19%) | (27%) |
(1) Non-GAAP Items | ||||||||
(2) Includes AKITA's share of Joint Venture revenue and expenses. | ||||||||
United States Drilling Division
Activity levels in the US were impacted by the collapse in oil prices as rigs began to shut down near the end of the first quarter and continued to slow down through the second quarter of 2020. Revenue in the US was $21,402,000 for the second quarter of 2020, down from $32,129,000 in the same period in 2019. This drop in revenue is attributable to the decrease in operating days which fell 46% to 544 operating days in the second quarter of 2020 from 1,008 operating days in the same period of 2019. The impact of COVID-19 on both the demand for oil and gas and the price of West Texas Intermediate ("WTI") were the dominant factors contributing to the decrease in activity.
The total active rig count in the US dropped 64% from 728 rigs at the end of March 2020 to 265 active rigs at the end of June 2020. At June 30, 2020, the Company had five drilling rigs with multi-year contracts representing approximately 1,500 days. Of these contracts, one is due to expire in 2020 and four in 2021.
Canadian Drilling Division
The sharp decline in oil prices late in the first quarter of 2020 impacted the demand for drilling services in Canada. During the second quarter of 2020, AKITA achieved 99 operating days in Canada, which corresponds to a utilization rate of 5%, compared to 13% (274 days) in the second quarter of 2019, with an industry average of 4% in the second quarter of 2020 compared to 18% in the same period of 2019. This decrease in activity had a corresponding impact on revenue (including AKITA's share of Joint Venture revenue) which decreased to $5,000,000 in the second quarter of 2020 from $8,636,000 in the same period of 2019.
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 June 30, 2020, 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 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 2020 second 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 (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.
SOURCE AKITA Drilling Ltd.
For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530