AKITA Drilling Ltd. Announces 2009 Earnings and Funds Flow
Mar 24, 2010
CALGARY, March 24 /CNW/ - Earnings for the year ended December 31, 2009 were $8,380,000 or $0.46 per share on revenue of $106,263,000. Comparative figures for 2008 were $14,847,000 or $0.84 per share on revenue of $137,246,000. Funds flow from continuing operations for the current year was $23,960,000 as compared to $34,149,000 in 2008 while cash flow from operations for 2009 was $29,235,000 as compared to $19,367,000 in 2008.
The Company's rig utilization in 2009 was 31.1% and once again compared favourably to the industry average of 24.6%, but fell short of AKITA's 2008 utilization of 42.2%. This represented the lowest annual utilization rate achieved by AKITA since its inception in 1993. AKITA's conventional rigs averaged 23.7% utilization. Pad rigs fared better, averaging 59.5% utilization.
AKITA currently has eight rigs with pad moving capabilities which are actively drilling for both heavy oil in north east Alberta and natural gas in shale formations. Two of AKITA's rigs were retro-fitted into pad rigs from conventional configurations during 2008 and 2009. Demand remained steady throughout the year for pad rigs to drill either heavy oil (five rigs) or natural gas, particularly in shale bearing formations (three rigs).
The Company maintains significant financial strength, which has placed AKITA in a strong position to weather the current market conditions. At December 31, 2009 the Company had $69.9 Million in working capital ($3.83 per share) including $34.1 Million in cash and cash equivalents ($1.87 per share), $18.0 Million in term deposits ($0.99 per share) and no long-term debt. As well, the carrying value for the Company's fleet was only $142.2 Million ($3.7 Million per rig). Although an evaluation of replacement cost for AKITA's fleet has not been performed, management is confident that the cost to replace the Company's fleet is significantly higher than its carrying value.
On October 20, 2009, the Canadian Association of Oilwell Drilling Contractors provided its industry drilling forecast for 2010 estimating the drilling of 8,523 wells, compared to 8,360 wells drilled in 2009. The current year estimate was based upon commodity price assumptions of US $70 per barrel for crude oil and Cdn $5.50 per mcf for natural gas. Although the price of crude oil has, at times, been nearly 10% above this forecasted price, to date, the commodity price for natural gas has been approximately 10% below the forecast target. Management remains cautious in predicting that AKITA's 2010 drilling activity will be significantly greater than 2009 levels given the current commodity price structure.
The drilling market continues to demonstrate a clear dichotomy with respect to the market for conventional rigs and the market for pad rigs. The overall short-term prognosis for conventional rigs is for continued weakness unless commodity prices for crude oil and, more significantly, natural gas increase in a sustained fashion. One bright spot in the conventional rig market that occurred in 2009 and appears to provide opportunities in 2010 relates to the market for drilling potash. This work has had a positive impact on AKITA's double sized rigs in Saskatchewan.
Selected financial information for the Company is as follows:
Consolidated Balance Sheets
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December 31 ($000's of Canadian Dollars) 2009 2008
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Assets
Current assets
Cash and cash equivalents $ 34,142 $ 42,168
Term deposits 18,000 -
Income taxes recoverable 330 -
Other 421 1,123
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81,416 84,825
Restricted cash 5,000 5,000
Capital assets 147,799 153,044
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$234,215 $242,869
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Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 10,123 $ 20,061
Dividends payable 1,277 1,276
Deferred revenue 197 -
Income taxes payable - 399
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11,597 21,736
Future income taxes 20,041 18,818
Pension liability 1,131 3,854
Class A and Class B Shareholders' Equity
Class A and Class B shares 23,376 23,312
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Contributed surplus 2,271 2,271
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Accumulated other comprehensive income (354) -
Retained earnings 176,153 172,878
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175,799 172,878
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201,446 198,461
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$234,215 $242,869
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Consolidated Statements of Earnings
and Retained Earnings
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Year ended December 31 ($000's of Canadian
Dollars, except per share amounts) 2009 2008
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Revenue $106,263 $137,246
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Costs and expenses
Operating and maintenance 67,649 87,123
Depreciation 17,476 16,667
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95,067 120,126
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Revenue less costs and expenses 11,196 17,120
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Other income (expense)
Interest income 524 1,814
Gain on sale of joint venture interests in
rigs and other assets 396 673
Gain (loss) on foreign currency translation (215) 526
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705 3,013
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Earnings before income taxes 11,901 20,133
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Income taxes
Current 2,096 3,384
Future 1,425 3,763
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3,521 7,147
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Earnings from continuing operations 8,380 12,986
Gain on disposal from discontinued operations,
net of tax - 1,941
Discontinued operations, net of tax - (80)
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Net earnings 8,380 14,847
Retained earnings, beginning of year 172,878 163,559
Dividends declared (5,105) (5,111)
Adjustment on repurchase and
cancellation of share capital - (417)
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Retained earnings, end of year $176,153 $172,878
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Earnings per Class A and Class B share from
continuing operations
Basic $ 0.46 $ 0.71
Diluted $ 0.46 $ 0.71
Earnings per Class A and Class B share
Basic $ 0.46 $ 0.81
Diluted $ 0.46 $ 0.81
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Consolidated Statements of Cash Flows
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Year ended December 31
($000's of Canadian Dollars) 2009 2008
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Operating activities
Earnings from continuing operations $ 8,380 $ 12,986
Non-cash items included in earnings
Depreciation 17,476 16,667
Expense (recovery) for defined benefit
pension plan (2,723) 245
Stock options charged to expense - 1,161
Gain on sale of joint venture interests
in rigs and other assets (396) (673)
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Funds flow from continuing operations 23,960 34,149
Cash provided from discontinued operations - 24
Change in non-cash working capital 5,275 (14,806)
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29,235 19,367
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Investing activities
Capital expenditures (12,341) (19,567)
Proceeds on sales of joint venture interests
in rigs and other assets 506 1,435
Proceeds on sales of discontinued assets - 3,510
Cash restricted for loan guarantees - -
Reduction in investments - -
Change in non-cash working capital (20,031) (158)
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(31,866) (14,780)
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Financing activities
Dividends paid (5,105) (5,111)
Proceeds received on exercise of stock options 64 -
Repurchase of share capital - (474)
Change in non-cash working capital - -
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(5,041) (5,585)
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Foreign currency translation (354) -
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Increase (decrease) in cash (8,026) (998)
Cash position, beginning of year 42,168 43,166
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Cash position, end of year $ 34,142 $ 42,168
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Interest paid during the year $ 66 $ 48
Income taxes paid during the year $ 2,825 $ 4,377
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Consolidated Statements of Comprehensive Income
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Year ended December 31 ($000's of Canadian Dollars) 2009 2008
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Net earnings $ 8,380 $ 14,847
Other comprehensive income
Foreign currency translation adjustment (354) -
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Comprehensive income $ 8,026 $ 14,847
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FORWARD-LOOKING STATEMENTS
From time to time Akita Drilling Ltd. ("AKITA" or the "Company") makes written and verbal forward-looking statements. These forward-looking statements include but are not limited to comments with respect to our objectives and strategies, financial condition, the results of our operations and business, our outlook for industry and our risk management discussion. Forward looking statements are typically identified with words such as "believe", "expect", "forecast", "anticipate", "intend", "estimate", "plan" and "project" and similar expressions of future or conditional events such as "will", "may", "should", "could" or "would".
By their nature these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not be achieved. We caution readers of this News Release not to place undue reliance on these forward-looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.
Forward-looking statements may be influenced by the following factors: the level of exploration and development activity carried on by AKITA's customers, world oil and North American natural gas prices, weather, access to capital markets and government policies. We caution that the foregoing list of important factors is not exhaustive and that when 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.
%SEDAR: 00002868E
For further information: Mr. Murray Roth, Vice President Finance, (403) 292-7950, Website: http://www.akita-drilling.com