AKITA announces the continuation of corporate debt reduction plan and annual results
Mar 15, 2021
CALGARY, AB, March 15, 2021 /CNW/ - AKITA Drilling Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. (the "Company") weathered the impact of the severe economic slowdown, attributable to the COVID-19 global pandemic that curtailed drilling activity over the last three quarters of 2020 by implementing a cost cutting initiative across the entire company and has emerged well positioned for what appears to be the first signs of a recovery in drilling activity. Despite operating days decreasing in both Canada and the US by 41% and 32% respectively in 2020, AKITA achieved $10 million of debt reduction over the course of the year, effectively reducing its total debt from $84 million at December 31, 2019 to $74 million at December 31, 2020. In the first quarter of 2021, the Company operated nine of its 17 US based rigs and eight of its 20 based Canadian rigs and is looking forward to a potential recovery in drilling activity over the balance of 2021. Karl Ruud, AKITA's President and Chief Executive Officer stated: "Activity levels in 2020 were decimated by the end of the first quarter. We responded by implementing a deep cost cutting initiative across the entire Company and are now in position to benefit from increased activity levels. Our aim in 2021 remains debt reduction and I was pleased we accomplished $10 million in debt reduction over the course of 2020 despite the reduction in operating days."
Furthermore, the Company is pleased to announce that it has recently been awarded two geothermal drilling projects: one in Alberta and a second in British Columbia, whereby a portion of the revenue generated will benefit AKITA's First Nation partner, Saulteau First Nations. AKITA will continue to pursue opportunities aligned with its commitment to social responsibility and welcomes an opportunity to establish itself as an industry leader in geothermal drilling.
The Company announces annual results for the year ended December 31, 2020. The Company recorded a net loss of $93,274,000 in 2020, up from a loss of $19,875,000 in 2019. Included in the Company's net loss for 2020 is an $80,000,000 asset impairment expense. Adjusting for impairment, the Company's net loss for 2020 was $20,674,000. Adjusted funds flow from operations decreased to $10,321,000 in 2020 from $12,925,000 in 2019 and adjusted EBITDA decreased to $15,617,000 from $19,130,000 over the same period.
CONSOLIDATED FINANCIAL HIGHLIGHTS
$Thousands except per share amounts
Adjusted EBIDTA (1)
Adjusted funds flow from operations(1)
Weighted average shares outstanding
(1) Non-GAAP Items
CONSOLIDATED OPERATIONAL HIGHLIGHTS
Revenue per operating day(1)(2)
Operating and maintenance per operating day(1)(2)
Operating margin per operating day(1)(2)
Revenue per operating day(1)
Operating and maintenance per operating day(1)
Operating margin per operating day(1)
(2)Includes AKITA's share of joint venture revenue and expenses.
United States Drilling Division
In the US, the activity decline that began in the latter part of 2019, due to the volatility in oil and gas prices and the pressure on operators to operate within free cash flow, continued to impact results in 2020. These pressures were exacerbated in late Q1 2020 by the combined effects of the Saudi Arabia and Russia oil price war and the effects of the COVID-19 global pandemic. Several of the Company's drilling rigs operating in the first quarter shut down drilling operations as prices dropped further, leaving five active rigs at the end of September 2020, down from 11 active rigs at the end of March 2020. The Company ended the year with 8 active rigs in December of 2020. The total active rig count in the US dropped 67% from 790 rigs at the start of 2020 to 261 rigs at the end of September 2020 before increasing to 341 rigs by year-end.
Revenue in the US was $91,198,000 for 2020, down from $127,514,000 in 2019. This 28% drop in revenue is attributable to the decrease in operating days, which fell 32% to 2,555 operating days in 2020 from 3,747 operating days over the same period in 2019. Operating margin per operating day increased to $7,944 in 2020 from $7,031 in 2019 due to standby revenue received on two of the Company's rigs. Revenue in the US accounted for 76% of the Company's total 2020 revenue, up from 72% in 2019.
Canadian Drilling Division
In Canada, industry utilization was higher at the beginning of the first quarter of 2020 than at the same point in 2019, but declined rapidly in March as the above mentioned factors reduced demand for drilling services thereby negatively impacting rig utilization. This decline in rig utilization reached a low point in June of 2020 before it began to slowly improve, however, demand over the year ended well below 2019 levels. By the end of December 2020, the Company's Canadian division had three active rigs.
Revenue in Canada was $33,560,000 for 2020, down from $53,665,000 in 2019. This 37% drop in revenue is attributable to the decrease in operating days, which fell 41% to 945 operating days in 2020 from 1,606 operating days over the same period in 2019. Operating margin per operating day increased slightly to $8,734 in 2020 from $8,249 in 2019 due to the mix of rigs operating in 2020. The federal government's CEWS program provided the Company with $2,269,000 in Canadian Emergency Wage Subsidy ("CEWS") in 2020.
This news release shall be used as preparation for reading the full disclosure documents. AKITA's audited consolidated financial statements and management's discussion and analysis for the year ended December 31, 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.
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 2020 December 31, 2020 Management's Discussion & Analysis.
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.
For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530