AKITA announces third quarter results and net income of $1.1 million for the quarter
Nov 4, 2024
CALGARY, AB , Nov. 4, 2024 /CNW/ - AKITA Drilling Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. ("AKITA" or the "Company") announces results for the nine months ended September 30, 2024.
The Company's net income decreased to $1,106,000 in the third quarter of 2024 from $3,880,000 during the same period of 2023. Adjusted funds flow from operations decreased to $8,435,000 in the third quarter of 2024, from $10,566,000 in the same period of 2023. Results in the third quarter of 2024 were down compared to the same period of 2023 due to reduced operating margin per day in the Company's Canadian division due to rig mix and reduced activity in the US division.
Net cash from operations increased to $6,458,000 for the three months ended September 30, 2024, compared to $2,308,000 in the same period of 2023, due to the positive change in non-cash working capital. Total debt decreased to $55,551,000 at the end of the third quarter of 2024 from $79,223,000 at the same time in 2023.
In contrast to the continuing decrease in the US industry active rig count, AKITA's US active rig count increased through the quarter, from 8 rigs at the start of July to 12 active rigs at the end of September, equivalent to 80% utilization compared to a utilization rate of 40% for the industry as a whole at the end of the quarter. A similar increase occurred in Canada where AKITA's active rig count increased from 9 rigs at the start of the quarter to 12 rigs at the end of the quarter, equivalent to 71% utilization compared to 57% in the Canadian industry at quarter end.
Colin Dease, AKITA's Chief Executive Officer stated: "We are extremely proud of the debt repayment we have achieved year to date and of our success in reactivating rigs in the US despite challenging market conditions. With 12 active rigs in each division, our activity is now strong and balanced between Canada and the US, and we anticipate a strong fourth quarter for the Company."
CONSOLIDATED FINANCIAL HIGHLIGHTS
($Thousands except per share amounts) | For the three months ended September 30, | For the nine months ended September 30, | |||||||||
2024 | 2023 | Change | % Change | 2024 | 2023 | Change | % Change | ||||
Revenue | 45,828 | 54,813 | (8,985) | (16 %) | 130,469 | 178,162 | (47,693) | (27 %) | |||
Operating and maintenance expenses | 35,727 | 41,387 | (5,660) | (14 %) | 99,044 | 128,801 | (29,757) | (23 %) | |||
Operating margin | 10,101 | 13,426 | (3,325) | (25 %) | 31,425 | 49,361 | (17,936) | (36 %) | |||
Margin % | 22 % | 24 % | (2 %) | (8 %) | 24 % | 28 % | (4 %) | (14 %) | |||
Net cash from operating activities | 6,458 | 2,308 | 4,150 | 180 % | 24,318 | 18,044 | 6,274 | 35 % | |||
Adjusted funds flow from operations(1) | 8,435 | 10,566 | (2,131) | (20 %) | 26,080 | 38,346 | (12,266) | (32 %) | |||
Per share | 0.21 | 0.27 | (0.06) | (22 %) | 0.66 | 0.97 | (0.31) | (32 %) | |||
Net income (loss) | 1,106 | 3,880 | (2,774) | (71 %) | 3,254 | 19,580 | (16,326) | (83 %) | |||
Per share | 0.03 | 0.10 | (0.07) | (70 %) | 0.08 | 0.49 | (0.41) | (84 %) | |||
Capital expenditures | 7,378 | 4,566 | 2,812 | 62 % | 18,439 | 11,770 | 6,669 | 57 % | |||
Weighted average shares outstanding | 39,734 | 39,650 | 84 | 0 % | 39,728 | 39,650 | 78 | 0 % | |||
Total assets | 251,486 | 267,061 | (15,575) | (6 %) | 251,486 | 267,061 | (15,575) | (6 %) | |||
Total debt | 55,551 | 79,223 | (23,672) | (30 %) | 55,551 | 79,223 | (23,672) | (30 %) | |||
(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 | 2024 | 2023 | Change | % Change | 2024 | 2023 | Change | % Change | ||
Revenue Canada | 14,842 | 15,104 | (262) | (2 %) | 40,211 | 44,237 | (4,026) | (9 %) | ||
Revenue from joint venture drilling rigs | 11,038 | 11,099 | (61) | (1 %) | 33,185 | 27,990 | 5,195 | 19 % | ||
Flow through charges(1) | (855) | (3,117) | 2,262 | 73 % | (2,539) | (5,126) | 2,587 | 50 % | ||
Adjusted revenue Canada(1) | 25,025 | 23,086 | 1,939 | 8 % | 70,857 | 67,101 | 3,756 | 6 % | ||
Operating and maintenance | 11,577 | 10,226 | 1,351 | 13 % | 30,057 | 32,621 | (2,564) | (8 %) | ||
Operating and maintenance expenses from joint venture drilling rigs | 7,989 | 8,641 | (652) | (8 %) | 23,250 | 21,015 | 2,235 | 11 % | ||
Flow through charges(1) | (855) | (3,117) | 2,262 | 73 % | (2,539) | (5,126) | 2,587 | 50 % | ||
Adjusted operating and maintenance expenses Canada(1) | 18,711 | 15,750 | 2,961 | 19 % | 50,768 | 48,510 | 2,258 | 5 % | ||
Adjusted operating margin Canada(1) | 6,314 | 7,336 | (1,022) | (14 %) | 20,089 | 18,591 | 1,498 | 8 % | ||
Margin %(1) | 25 % | 32 % | (7 %) | (22 %) | 28 % | 28 % | 0 % | 0 % | ||
Operating days | 698 | 583 | 115 | 20 % | 1,819 | 1,774 | 45 | 3 % | ||
Adjusted revenue per operating day(1) | 35,852 | 39,599 | (3,747) | (9 %) | 38,954 | 37,825 | 1,129 | 3 % | ||
Adjusted operating and maintenance | 26,807 | 27,015 | (208) | (1 %) | 27,910 | 27,345 | 565 | 2 % | ||
Adjusted operating margin per operating day(1) | 9,045 | 12,584 | (3,539) | (28 %) | 11,044 | 10,480 | 564 | 5 % | ||
Utilization(1) | 38 % | 32 % | 6 % | 19 % | 33 % | 32 % | 1 % | 3 % | ||
Rig count | 17 | 20 | (3) | (15 %) | 17 | 20 | (3) | (15 %) | ||
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. | ||||||||||
During the third quarter of 2024, AKITA achieved 698 operating days in Canada, which corresponds to a utilization rate of 38%, compared to 32% (583 days) in the third quarter of 2023, and compared to an industry average of 49%. AKITA's single and double rigs had a combined increase of 184 operating days in the third quarter of 2024 when compared to the same period in 2023. This was offset by fewer operating days for AKITA's oilsands triple rigs in the quarter. AKITA lagged industry utilization in the quarter as the Company's ramp up after spring breakup was pushed further into the quarter than expected due to operator delays. At the end of the third quarter 2024, AKITA was at 71% utilization compared to industry utilization of 57%. Although activity increased in the quarter when compared to the prior year, the adjusted operating margin in Canada decreased to $6,314,000 in 2024 compared to $7,336,000 in the same period of 2023.
Adjusted revenue per operating day led to the decrease in adjusted operating margin in Canada, despite increased activity. In the third quarter of 2024, adjusted revenue per day decreased to $35,852 from $39,599 in the third quarter of 2023. This decline resulted from a change in the mix of rigs operating, with a higher concentration of high-margin rigs working in the third quarter of 2023. Adjusted operating and maintenance expenses per operating day decreased slightly to $26,807 in the third quarter of 2024, from $27,015 in the same period of 2023. This decrease, similar to the change in revenue per day, is the result of the change in rig mix but is offset by escalating costs including labour, maintenance and other ancillary costs.
United States Drilling Division
For the three months ended September 30, | For the nine months ended September 30, | |||||||||
$Thousands except per day amounts | 2024 | 2023 | Change | % Change | 2024 | 2023 | Change | % Change | ||
Revenue US | 30,986 | 39,709 | (8,723) | (22 %) | 90,258 | 133,925 | (43,667) | (33 %) | ||
Flow through charges(1) | (3,310) | (4,355) | 1,045 | 24 % | (10,652) | (13,427) | 2,775 | 21 % | ||
Adjusted revenue US(1) | 27,676 | 35,354 | (7,678) | (22 %) | 79,606 | 120,498 | (40,892) | (34 %) | ||
Operating and maintenance expenses US | 24,150 | 31,161 | (7,011) | (22 %) | 68,987 | 96,180 | (27,193) | (28 %) | ||
Flow through charges(1) | (3,310) | (4,355) | 1,045 | 24 % | (10,652) | (13,427) | 2,775 | 21 % | ||
Adjusted operating and maintenance expenses US(1) | 20,840 | 26,806 | (5,966) | (22 %) | 58,335 | 82,753 | (24,418) | (30 %) | ||
Adjusted operating margin US(1) | 6,836 | 8,548 | (1,712) | (20 %) | 21,271 | 37,745 | (16,474) | (44 %) | ||
Margin %(1) | 25 % | 24 % | 1 % | 4 % | 27 % | 31 % | (4 %) | (13 %) | ||
Operating days | 713 | 908 | (195) | (21 %) | 2,056 | 3,041 | (985) | (32 %) | ||
Adjusted revenue per operating day(1) | 38,816 | 38,936 | (120) | (0 %) | 38,719 | 39,624 | (905) | (2 %) | ||
Adjusted operating and maintenance expenses per operating day(1) | 29,229 | 29,522 | (293) | (1 %) | 28,373 | 27,212 | 1,161 | 4 % | ||
Adjusted operating margin per operating day(1) | 9,587 | 9,414 | 173 | 2 % | 10,346 | 12,412 | (2,066) | (17 %) | ||
Utilization(1) | 52 % | 66 % | (14 %) | (21 %) | 50 % | 74 % | (24 %) | (32 %) | ||
Rig count | 15 | 15 | - | 0 % | 15 | 15 | - | 0 % | ||
(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. | ||||||||||
In the US, the active rig count declined from 650 average active rigs in the third quarter of 2023, to 601 active rigs at the start of 2024 and then further declined to 566 active rigs at the end of the third quarter of 2024. AKITA's active rig count initially followed a similar pattern, dropping from an average of 12 active rigs in the third quarter of 2023 to an average of 9.5 active rigs in the third quarter of 2024, however ending the quarter at 12 active rigs. Operating days decreased from 908 operating days in the third quarter of 2023 to 713 operating days in the third quarter of 2024.
This reduction in activity resulted in adjusted operating margin decreasing to $6,836,000 in the third quarter of 2024, from $8,548,000 in the same period of 2023.
Adjusted operating and maintenance expense per operating day decreased slightly to $29,229 per day in the third quarter of 2024, from $29,522 in the third quarter of 2023, changing 1% quarter-over-quarter despite increasing costs throughout the industry.
Adjusted operating margin per operating day increased 2% for third quarter of 2024, compared to the same period for 2023. This is a combination of a slight decrease in adjusted revenue per operating day, offset by a larger decrease in adjusted operating margin per operating day.
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, 2024 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 | ||
2024 | 2023 | 2024 | 2023 | |
Net cash from operating activities | 6,458 | 2,308 | 24,318 | 18,044 |
Interest paid | 935 | 1,340 | 3,320 | 5,049 |
Interest expense | (984) | (1,393) | (3,467) | (5,208) |
Post-employment benefits paid | 78 | 78 | 236 | 243 |
Equity income from joint ventures | 2,918 | 2,361 | 9,592 | 6,696 |
Change in non-cash working capital | (970) | 5,872 | (7,919) | 13,522 |
Adjusted funds flow from operations | 8,435 | 10,566 | 26,080 | 38,346 |
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