AKITA announces positive third quarter results

Nov 3, 2022

CALGARY, AB, Nov. 3, 2022 /CNW/ - AKITA Drilling Ltd. (TSX: AKT.A)

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

($Thousands except per share amounts)	For the three months ended September 30,				For the nine months ended September 30,
($Thousands except per share amounts)	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.

SOURCE AKITA Drilling Ltd.

For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7537