AKITA announces third quarter results and net income of $3.9 million for the quarter.
Nov 1, 2023
CALGARY, AB, Nov. 1, 2023 /CNW/ - AKITA Drilling Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. ("AKITA" or the "Company") announces results for the nine months ended September 30, 2023.
The Company's net income increased to $3,880,000 in the third quarter of 2023 up from $2,660,000 during the same period of 2022. With a fifth consecutive quarter of positive earnings, the Company has returned to a positive retained earnings balance ($3,672,000) which has been in a deficit position since the asset impairment recorded in the first quarter of 2021. Higher day rates drove the improved earnings as activity levels fell between the two quarters (1,491 operating days in the third quarter of 2023 versus 1,676 in the same period of 2022). Adjusted funds flow from operations increased 18% to $10,566,000 in the third quarter of 2023, from $8,957,000 in the same period of 2022, also driven by improved rates. Net cash from operations decreased to $2,308,000 for the three months ended September 30, 2023, compared to $3,727,000 in the same period of 2022, due to a third quarter working capital build in 2023. Total debt decreased to $79,233,000 at the end of the third quarter of 2023 from $94,436,000 at the same time in 2022. In Canada, the Company began the quarter operating 10 rigs which declined to five at the end of the quarter primarily due to timing of operator programs which will reverse in the fourth quarter. In the US the active rigs for the Company went from 14 at the start of the quarter and down to 8 active rigs at the end of the third quarter of 2023 as the active rig count continued to fall for the US industry as a whole. AKITA anticipates the active rig count for the Company will partially rebound in the fourth quarter of 2023.
The Company spent $4,566,000 on routine capital items in the third quarter of 2023, up from $3,020,000 over the same period in 2022. In addition to routine capital items the Company commenced an upgrade to one of its oil sands designed rigs to enable the rig to be competitive in the deep gas market in Canada. This upgrade is anticipated to be done mid fourth quarter of 2023 at a cost of approximately $4,000,000.
Colin Dease, AKITA's Chief Executive Officer stated: "AKITA's US active rig count stayed constant at 14 rigs until the third quarter of 2023 despite broader market declines in the industry, highlighting the marketability of our US fleet. We are confident our lull in activity will be short lived and we are looking forward to 2024 and increased activity in both Canada and the US.
CONSOLIDATED FINANCIAL HIGHLIGHTS
($Thousands except per share amounts) | For the three months ended September 30, | For the nine months ended September 30, | |||||||||
2023 | 2022 | Change | % Change | 2023 | 2022 | Change | % Change | ||||
Revenue | 54,813 | 53,526 | 1,287 | 2 % | 178,162 | 141,471 | 36,691 | 26 % | |||
Operating and maintenance expenses | 41,387 | 40,755 | 632 | 2 % | 128,801 | 111,218 | 17,583 | 16 % | |||
Operating margin | 13,426 | 12,771 | 655 | 5 % | 49,361 | 30,253 | 19,108 | 63 % | |||
Margin % | 24 % | 24 % | 0 % | 0 % | 28 % | 21 % | 7 % | 33 % | |||
Net cash from operating activities | 2,308 | 3,727 | (1,419) | (38 %) | 18,044 | 10,163 | 7,881 | 78 % | |||
Adjusted funds flow from operations(1) | 10,566 | 8,957 | 1,609 | 18 % | 38,346 | 18,669 | 19,677 | 105 % | |||
Per share | 0.27 | 0.23 | 0.04 | 17 % | 0.97 | 0.47 | 0.50 | 106 % | |||
Net income (loss) | 3,880 | 2,660 | 1,220 | 46 % | 19,580 | (4,525) | 24,105 | 533 % | |||
Per share | 0.10 | 0.07 | 0.03 | 43 % | 0.49 | (0.11) | 0.60 | 545 % | |||
Capital expenditures | 4,566 | 3,020 | 1,546 | 51 % | 11,770 | 13,065 | (1,295) | (10 %) | |||
Weighted average shares outstanding | 39,650 | 39,624 | 26 | 0 % | 39,650 | 39,614 | 36 | 0 % | |||
Total assets | 267,061 | 262,576 | 4,485 | 2 % | 267,061 | 262,576 | 4,485 | 2 % | |||
Total debt | 79,223 | 94,436 | (15,213) | (16 %) | 79,223 | 94,436 | (15,213) | (16 %) | |||
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. | |||||||||||
Canadian Drilling Division
$Thousands except per day amounts | ||||||||||
For the three months ended September 30, | For the nine months ended September 30, | |||||||||
2023 | 2022 | Change | % Change | 2023 | 2022 | Change | % Change | |||
Revenue Canada | 15,104 | 12,988 | 2,116 | 16 % | 44,237 | 40,593 | 3,644 | 9 % | ||
Revenue from joint venture drilling rigs | 11,099 | 8,458 | 2,641 | 31 % | 27,990 | 19,412 | 8,578 | 44 % | ||
Flow through charges(1) | (3,117) | (1,447) | (1,670) | (115 %) | (5,126) | (3,088) | (2,038) | (66 %) | ||
Adjusted revenue Canada(1) | 23,086 | 19,999 | 3,087 | 15 % | 67,101 | 56,917 | 10,184 | 18 % | ||
Operating and maintenance | 10,226 | 10,064 | 162 | 2 % | 32,621 | 30,993 | 1,628 | 5 % | ||
Operating and maintenance expenses from joint venture drilling rigs | 8,641 | 6,647 | 1,994 | 30 % | 21,015 | 15,165 | 5,850 | 39 % | ||
Flow through charges(1) | (3,117) | (1,447) | (1,670) | (115 %) | (5,126) | (3,088) | (2,038) | (66 %) | ||
Adjusted operating and maintenance expenses Canada(1) | 15,750 | 15,264 | 486 | 3 % | 48,510 | 43,070 | 5,440 | 13 % | ||
Adjusted operating margin Canada(1) | 7,336 | 4,735 | 2,601 | 55 % | 18,591 | 13,847 | 4,744 | 34 % | ||
Margin %(1) | 32 % | 24 % | 8 % | 33 % | 28 % | 24 % | 4 % | 17 % | ||
Operating days | 583 | 644 | (61) | (9 %) | 1,774 | 1,935 | (161) | (8 %) | ||
Adjusted revenue per operating day(1) | 39,599 | 31,054 | 8,545 | 28 % | 37,825 | 29,414 | 8,411 | 29 % | ||
Adjusted operating and maintenance | 27,015 | 23,702 | 3,313 | 14 % | 27,345 | 22,258 | 5,087 | 23 % | ||
Adjusted operating margin per operating day(1) | 12,584 | 7,352 | 5,232 | 71 % | 10,480 | 7,156 | 3,324 | 46 % | ||
Utilization(1) | 32 % | 35 % | (3 %) | (9 %) | 32 % | 35 % | (3 %) | (9 %) | ||
Rig count | 20 | 20 | - | 0 % | 20 | 20 | - | 0 % | ||
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. | ||||||||||
During the third quarter of 2023, AKITA achieved 583 operating days in Canada, which corresponds to a utilization rate of 32%, compared to 35% (644 days) in the third quarter of 2023 and compared to an industry average of 38% in the third quarter of 2023. The decrease in activity for AKITA was a result of a lull in the demand for the Company's oil sands rigs, as programs ended during the quarter and the effect of one of the Company's customers being acquired. This decrease in activity for the Company was mitigated by increased day rates which resulted in the adjusted operating margin in Canada increasing to $7,336,000 in the third quarter of 2023, up from $4,735,000 in the same period of 2022.
Adjusted revenue per operating day was the key driver for improved results in Canada in the quarter, increasing 28% quarter over quarter to $39,599 in the third quarter of 2023. Corresponding to this increase in revenue per day is a 14% increase in adjusted operating and maintenance expense per day between the third quarter of 2022 and 2023. Together, these two factors resulted in a 71% increase in adjusted operating margin per operating day, increasing to $12,584 per day in the third quarter of 2023, up from $7,352 in the same period of 2022.
United States Drilling Division
$Thousands except per day amounts | ||||||||||
For the three months ended September 30, | For the nine months ended September 30, | |||||||||
2023 | 2022 | Change | % Change | 2023 | 2022 | Change | % Change | |||
Revenue US | 39,709 | 40,537 | (828) | (2 %) | 133,925 | 100,878 | 33,047 | 33 % | ||
Flow through charges(1) | (4,355) | (4,215) | (140) | (3 %) | (13,427) | (9,536) | (3,891) | (41 %) | ||
Adjusted revenue US(1) | 35,354 | 36,322 | (968) | (3 %) | 120,498 | 91,342 | 29,156 | 32 % | ||
Operating and maintenance expenses US | 31,161 | 30,691 | 470 | 2 % | 96,180 | 80,225 | 15,955 | 20 % | ||
Flow through charges(1) | (4,355) | (4,215) | (140) | (3 %) | (13,427) | (9,536) | (3,891) | (41 %) | ||
Adjusted operating and maintenance expenses US(1) | 26,806 | 26,476 | 330 | 1 % | 82,753 | 70,689 | 12,064 | 17 % | ||
Adjusted operating margin US(1) | 8,548 | 9,846 | (1,298) | (13 %) | 37,745 | 20,653 | 17,092 | 83 % | ||
Margin %(1) | 24 % | 27 % | (3 %) | (11 %) | 31 % | 23 % | 8 % | 35 % | ||
Operating days | 908 | 1,032 | (124) | (12 %) | 3,041 | 3,042 | (1) | (0 %) | ||
Adjusted revenue per operating day(1) | 38,936 | 35,196 | 3,740 | 11 % | 39,624 | 30,027 | 9,597 | 32 % | ||
Adjusted operating and maintenance expenses per operating day(1) | 29,522 | 25,655 | 3,867 | 15 % | 27,212 | 23,238 | 3,974 | 17 % | ||
Adjusted operating margin per operating day(1) | 9,414 | 9,541 | (127) | (1 %) | 12,412 | 6,789 | 5,623 | 83 % | ||
Utilization(1) | 66 % | 70 % | (4 %) | (6 %) | 74 % | 70 % | 4 % | 6 % | ||
Rig count | 15 | 16 | (1) | (6 %) | 15 | 16 | (1) | (6 %) | ||
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. | ||||||||||
Results in the Company's US operating segment declined in the third quarter of 2023 when compared to the same period of 2022. Activity decreased 12% in the third quarter of 2023 to 908 operating days compared to 1,032 in the third quarter of 2022. This reduction in activity for the Company combined with a slight reduction in adjusted operating margin per day of $127 resulted in a decrease in the adjusted operating margin in the US to $8,548,000 in the third quarter of 2023, down from $9,846,000 in the third quarter of 2022. Although this decrease does not appear significant when comparing the third quarter of 2023 to the third quarter of 2022, the decrease is more significant when compared to the second quarter of 2023. In the second quarter of 2023, the Company's adjusted operating margin per operating day was $13,742, the 20% decrease in adjusted operating margin per operating day between the second and third quarters of 2023 was a result of adjusted revenue per operating day decreasing 4% as some higher margin contacts ended in the quarter and adjusted operating and maintenance expense per day increasing 3% between the two quarters as maintenance costs increased. At the end of the third quarter, AKITA's US division was operating eight rigs, down from 14 at the start of the quarter.
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, 2023 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 and Supplementary Financial Measures
Non-GAAP Financial Measures
Adjusted Revenue and Adjusted Operating and Maintenance Expenses
Revenue and operating and maintenance expenses in AKITA's Canadian operating segment include revenue and expenses from AKITA's wholly-owned drilling rigs as well as its share of joint venture revenue and expenses.
Excluded from the revenue and expenses in AKITA's Canadian and US operating segment are flow through charges that are billed to operators and repaid to the Company. The volume and timing of the flow through charges can artificially impact the operational per day analysis and as a result management and certain investors may find the comparability between periods is improved when these flow through charges are excluded from revenue per day and operating and maintenance expense per day. The flow through charges do not have any impact on the Company's net earnings as the amounts offset each other.
Adjusted Funds Flow from Operations
Adjusted funds flow from operations is not a recognized GAAP measure under IFRS and readers should note that AKITA's method of determining adjusted funds flow from operations may differ from methods used by other companies, and includes cash flow from operating activities before working capital changes, equity income from joint ventures, and income tax amounts paid or recovered during the period. Nonetheless, management and certain investors may find adjusted funds flow from operations to be a useful measurement to evaluate the Company's operating results at year-end and within each year, since the seasonal nature of the business affects the comparability of non-cash working capital changes both between and within periods.
$Thousands | For the three months ended | For the nine months ended | ||
2023 | 2022 | 2023 | 2022 | |
Net cash from operating activities | 2,308 | 3,727 | 18,044 | 10,163 |
Interest paid | 1,340 | 2,044 | 5,049 | 4,480 |
Interest expense | (1,393) | (2,019) | (5,208) | (4,596) |
Post-employment benefits paid | 77 | 70 | 243 | 206 |
Equity income from joint ventures | 2,362 | 1,687 | 6,696 | 3,953 |
Change in non-cash working capital | 5,872 | 3,448 | 13,522 | 4,463 |
Adjusted funds flow from operations | 10,566 | 8,957 | 38,346 | 18,669 |
Non-GAAP Ratios
"Adjusted funds flow from operations per share" is calculated on the same basis as net loss per class A and class B share basic and diluted, utilizing the basic and diluted weighted average number of class A and class B shares outstanding during the periods presented.
"Adjusted revenue per operating day" may be useful to analysts, investors, other interested parties and management as a measure of pricing strength and is calculated by dividing adjusted revenue by the number of operating days for the period.
"Adjusted operating and maintenance expenses per operating day" may be useful to analysts, investors, other interested parties and management as it demonstrates a degree of cost control and provides a proxy for specific inflation rates incurred by the Company
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. In particular, forward-looking information in this news release includes, but is not limited to, references to the outlook for the drilling industry (including activity levels and day rates), the Company's relationships and customers and vendors, advantages associated with the percentage of pad drilling rigs in the Company's Canadian drilling fleet, the renewal of drilling contracts, and debt repayment.
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.
Although the Company believes that the expectations reflected in the forward-looking information are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and no assurance can be given that these expectations will prove to be correct. By their nature, these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and therefore carry the risk that the predictions and other forward-looking statements will not be realized. Readers of this news release are cautioned not to place undue reliance on these statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, estimates and intentions expressed in such forward-looking statements.
The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of, among other things, prevailing economic conditions; the level of exploration and development activity carried on by AKITA's customers, world crude oil prices and North American natural gas prices; global liquefied natural gas (LNG) demand, weather, access to capital markets; and government policies. We caution that the foregoing list of factors is not exhaustive and that while relying on forward-looking statements to make decisions with respect to AKITA, investors and others should carefully consider the foregoing factors, as well as other uncertainties and events, prior to making a decision to invest in AKITA. Except where required by law, the Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by it or on its behalf
SOURCE AKITA Drilling Ltd.
For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530