AKITA Drilling Ltd. Announces Third Quarter Results

CALGARY, Oct. 29 /CNW/ - AKITA Drilling Ltd.'s net earnings for the nine months ended September 30, 2009 were $5,215,000 ($0.29 per share) on revenue of $80,448,000. Comparative figures for 2008 were earnings of $12,826,000 ($0.70 per share) on revenue of $101,407,000. Funds flow from continuing operations for the period was $17,970,000 compared to $25,332,000 in 2008.

Earnings for the three months ended September 30, 2009 were $752,000 ($0.04 per share) on revenue of $20,871,000 compared to $3,681,000 ($0.20 per share) on revenue of $33,747,000 for the corresponding period in 2008. Funds flow from continuing operations for the quarter ended September 30, 2009 was $3,169,000 compared to $7,723,000 in the corresponding quarter in 2008.

Drilling activity remains at an all time low both for a third quarter and on a year-to-date basis since the inception of the Company. Operating statistics for the first nine months of 2009 and 2008 are as follows:

Operating  Operating
                                        Number of            Days       Days
                                       Drilling Rigs       (Third   (Year-to-
                                      Gross        Net    Quarter)      Date)
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    Canadian Operations    2009          39     36.225        808      2,875
                           2008          37     34.725      1,689      4,666
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    U.S. Operations        2009           2        1.0        185        395
                           2008           3        1.5         62        122
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    Total                  2009          41     37.225        993      3,270
                           2008          40     36.225      1,751      4,788
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The reduction in drilling activity has had a significant impact on the financial performance of the Company. Additionally, the Company's financial results have been adversely affected by foreign exchange losses and a significant reduction in interest income due to low interest rates. Offsetting these factors, the Company recorded a one-time reduction of $1,458,000 against its pension liability account during the third quarter of 2009 following the receipt of an updated actuarial report.

The modest pace of improvement from the second quarter to the third quarter is expected to continue in the short-term. The price of natural gas improved compared to earlier in the year, although not to levels expected to stimulate a significant increase in demand for drilling services. Management expects the short-term outlook to remain difficult until underlying fundamentals improve.

It is with a great deal of sadness that we advise of the recent death of John Hlavka. John faithfully served the Company with his vision, humility and integrity, leading it from its origins in the 1970's, through its transition into a public company in 1993 and thereafter through its growth and until his retirement as Chief Executive Officer in June of this year. John's leadership charted the course for the Company. His wisdom, determination and spirit will be missed by all.

Selected financial information for the Company is as follows:

Consolidated Balance Sheets

    -------------------------------------------------------------------------
    Unaudited                                  September 30       December 31
    ($000's)                                 2009        2008         2008
    -------------------------------------------------------------------------
    ASSETS
    Current assets
      Cash and cash equivalents            $  56,547   $  46,316   $  42,168
      Accounts receivable                     19,351      35,808      41,534
      Income taxes recoverable                 1,219           -           -
      Other                                    1,126       1,498       1,123
                                           ----------------------------------

                                              78,243      83,622      84,825
    Restricted cash                            5,000       5,000       5,000
    Capital assets                           150,401     147,642     153,044
                                           ----------------------------------

                                           $ 233,644   $ 236,264   $ 242,869

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    LIABILITIES
    Current liabilities
      Accounts payable and accrued
       liabilities                         $   9,082   $  12,941   $  20,061
      Dividends payable                        1,276       1,278       1,276
      Income taxes payable                         -       2,290         399
      Deferred revenue                         1,148       1,888           -
      Current portion of pension liability       157           -           -
                                           ----------------------------------

                                              11,663      18,397      21,736
    Future income taxes                       20,177      16,199      18,818
    Pension liability                          2,339       3,805       3,854

    CLASS A AND CLASS B SHAREHOLDERS'
     EQUITY
    Class A and Class B shares                23,359      23,334      23,312
    Contributed surplus                        2,271       2,271       2,271
    Accumulated other comprehensive income      (430)          -           -
    Retained earnings                        174,265     172,258     172,878
                                           ----------------------------------

                                             199,465     197,863     198,461
                                           ----------------------------------

                                           $ 233,644   $ 236,264   $ 242,869

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    Consolidated Statements of Earnings
    and Retained Earnings

    -------------------------------------------------------------------------
    Unaudited                      Three Months            Nine Months
    ($000's)                          Ended                   Ended
                                   September 30            September 30
                                 2009        2008        2009        2008
    -------------------------------------------------------------------------

    REVENUE                    $  20,871   $  33,747   $  80,448   $ 101,407
                               ----------------------------------------------

    COSTS AND EXPENSES
      Operating and maintenance   14,852      20,970      50,951      61,688
      Depreciation                 3,586       3,935      12,833      12,562
      Selling and administrative   1,311       4,079       9,368      13,026
                               ----------------------------------------------
                                  19,749      28,984      73,152      87,276
                               ----------------------------------------------
    Revenue less costs and
     expenses                      1,122       4,763       7,296      14,131
                               ----------------------------------------------

    OTHER INCOME (EXPENSE)
      Interest income                115         479         403       1,456
      Gain on sale of joint
       venture interests in
       rigs and other assets           -          32          79         696
      Gain (loss) on foreign
       currency translation         (136)         52        (231)         94
                               ----------------------------------------------
                                     (21)        563         251       2,246
                               ----------------------------------------------
    EARNINGS BEFORE INCOME
     TAXES                         1,101       5,326       7,547      16,377
                               ----------------------------------------------

    INCOME TAXES
      Current                         44       1,612         710       4,268
      Future                         305          33       1,622       1,144
                               ----------------------------------------------
                                     349       1,645       2,332       5,412
                               ----------------------------------------------
    EARNINGS FROM CONTINUING
     OPERATIONS                      752       3,681       5,215      10,965

    Gain on disposal from
     discontinued operations,
     net of tax                        -           -           -       1,941
    Discontinued operations,
     net of tax                        -           -           -         (80)
                               ----------------------------------------------

    NET EARNINGS                     752       3,681       5,215      12,826

    Retained earnings, beginning
     of period                   174,789     170,146     172,878     163,559
    Dividends declared            (1,276)     (1,277)     (3,828)     (3,835)
    Adjustment on repurchase and
     cancellation of share
     capital                           -        (292)          -        (292)
                               ----------------------------------------------
    RETAINED EARNINGS, END OF
     PERIOD                    $ 174,265   $ 172,258   $ 174,265   $ 172,258
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    Earnings per Class A and
     Class B share from
     continuing operations
      Basic                    $    0.04   $    0.20   $    0.29   $    0.60
      Diluted                  $    0.04   $    0.20   $    0.29   $    0.60

    Earnings per Class A and
     Class B share
      Basic                    $    0.04   $    0.20   $    0.29   $    0.70
      Diluted                  $    0.04   $    0.20   $    0.29   $    0.70
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    Consolidated Statements of Cash Flows

    -------------------------------------------------------------------------
    Unaudited                      Three Months            Nine Months
    ($000's)                          Ended                   Ended
                                   September 30            September 30
                                 2009        2008        2009        2008
    -------------------------------------------------------------------------

    OPERATING ACTIVITIES
    Earnings from continuing
     operations                $     752   $   3,681   $   5,215   $  10,965
    Non-cash items included in
     earnings from continuing
     operations
      Depreciation                 3,586       3,935      12,833      12,562
      Future income taxes            225          33       1,359       1,144
      Expense (recovery) for
       defined benefit pension
       plan                       (1,394)         65      (1,358)        196
      Stock options charged to
       expense                         -          41           -       1,161
      Gain on sale of joint
       venture interests in rigs
       and other assets                -         (32)        (79)       (696)
                               ----------------------------------------------
    Funds flow from continuing
     operations                    3,169       7,723      17,970      25,332
    Cash provided from (to)
     discontinued operations           -           -           -          24
    Change in non-cash working
     capital                       1,755     (14,065)     10,731     (13,208)
                               ----------------------------------------------
                                   4,924      (6,342)     28,701      12,148
                               ----------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures          (1,955)     (5,779)    (10,301)     (9,861)
    Proceeds on sale of joint
     venture interests in rigs
     and other assets                  -         119         190       1,259
    Proceeds on sale of
     discontinued assets               -           -           -       3,510
    Change in non-cash working
     capital                           -         211           -         243
                               ----------------------------------------------
                                  (1,955)     (5,449)    (10,111)     (4,849)
                               ----------------------------------------------
    FINANCING ACTIVITIES

    Dividends paid                (1,276)     (1,277)     (3,828)     (3,835)
    Repurchase of share
     capital                           -        (327)          -        (327)
    Proceeds received on
     exercise of stock options         -           -          47           -
    Change in non-cash working
     capital                           -          13           -          13
                               ----------------------------------------------
                                  (1,276)     (1,591)     (3,781)     (4,149)
                               ----------------------------------------------
    FOREIGN CURRENCY
     TRANSLATION                    (178)          -        (430)          -
                               ----------------------------------------------
    INCREASE (DECREASE) IN
     CASH                          1,515     (13,382)     14,379       3,150
    Cash position, beginning
     of period                    55,032      59,698      42,168      43,166
                               ----------------------------------------------
    CASH POSITION, END OF
     PERIOD                    $  56,547   $  46,316   $  56,547   $  46,316
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    Interest paid during the
     period                    $       9   $       8   $      24   $      15
    Income taxes paid during
     the period                $     439   $   1,199   $   4,126   $   3,687
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    Consolidated Statements of Comprehensive Income

    -------------------------------------------------------------------------
    Unaudited                      Three Months            Nine Months
    ($000's)                          Ended                   Ended
                                   September 30            September 30
                                 2009        2008        2009        2008
    -------------------------------------------------------------------------

    NET EARNINGS               $     752   $   3,681   $   5,215   $  12,826

    OTHER COMPREHENSIVE INCOME
      Foreign currency
       translation adjustment       (178)          -        (430)          -
                               ----------------------------------------------
    COMPREHENSIVE INCOME       $     574   $   3,681   $   4,785   $  12,826
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%SEDAR: 00002868E