Return to corporate site

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
expenses Canada

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
 expenses per operating day(1)

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
September 30,

For the nine months ended
September 30,


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