AKITA prioritizes debt reduction and announces second quarter results
Jul 31, 2019
AKITA Drilling Ltd. (TSX: AKT.A)
CALGARY, July 31, 2019 /CNW/ - AKITA's Board of Directors has elected to suspend the Company's dividends on its Class A Non-Voting and Class B Common Shares in light of the Company's desire to pay down its debt.
The Company's debt repayment plan includes the suspension of dividends as well as a continuing focus on cost cutting and other monetization and cash generating strategies.
During the second quarter of 2019 AKITA achieved 1,008 operating days in the US, compared to only 136 operating days in the US over the same period in 2018. In Canada, however, results were much weaker than in the prior year as operating days decreased by 50% to 274 days in 2019 compared to 548 in 2018. This translated to a consolidated net loss for the three months ended June 30, 2019 of $5,067,000 (or $0.13 per share) compared to a net loss of $2,959,000 (or $0.16 per share) for the corresponding period in 2018.
In the second quarter of 2019, AKITA's fleet of 17 rigs in the US generated the majority of the Company's revenue, 79% up from 19% in the same period of 2018. Despite a reduction in activity in the US for the industry and AKITA between the first quarter of 2019 and the second quarter of 2019, demand and activity in the US remain far stronger than in Canada.
Karl Ruud, AKITA's President and Chief Executive Officer stated: "Given the current market conditions in Canada, and softening in the US, Akita's highest priority is debt reduction through continuing our focus on cost controls and integration benefits. This discipline will leave Akita ideally positioned to take advantage of growth opportunities."
CONSOLIDATED FINANCIAL HIGHLIGHTS
($ thousands except per share amounts) | For the three months ended June 30, | For the six months ended June 30, | ||||||
2019 | 2018 | Change | % Change | 2019 | 2018 | Change | % Change | |
Adjusted revenue (1) | 40,765 | 21,016 | 19,749 | 94% | 93,971 | 55,487 | 38,484 | 69% |
Adjusted operating and | 28,820 | 15,200 | 13,620 | 90% | 62,830 | 40,850 | 21,980 | 54% |
Operating margin(1) | 11,945 | 5,816 | 6,129 | 105% | 31,141 | 14,637 | 16,504 | 113% |
Margin %(1) | 29% | 28% | 1% | 4% | 33% | 26% | 7% | 27% |
EBITDA(1) | 3,179 | 1,701 | 1,478 | 87% | 12,301 | 6,139 | 6,162 | 100% |
Per share | 0.08 | 0.09 | (0.01) | (11%) | 0.31 | 0.34 | (0.03) | (9%) |
Adjusted funds flow from | 1,559 | 1,638 | (79) | (5%) | 9,386 | 6,157 | 3,229 | 52% |
Per share | 0.04 | 0.09 | (0.05) | (56%) | 0.24 | 0.34 | (0.10) | (29%) |
Net loss | (5,067) | (2,959) | (2,108) | (71%) | (6,536) | (4,870) | (1,666) | (34%) |
Per share | (0.13) | (0.16) | 0.03 | 19% | (0.17) | (0.27) | 0.10 | 37% |
Capital expenditures | 6,759 | 2,320 | 4,439 | 191% | 7,782 | 4,005 | 3,777 | 94% |
Dividend declared | 3,367 | 1,525 | 1,842 | 121% | 6,734 | 3,050 | 3,684 | 121% |
Weighted average shares | 39,608 | 17,946 | 21,662 | 121% | 39,608 | 17,946 | 21,662 | 121% |
Total assets | 391,162 | 192,894 | 198,268 | 103% | 391,162 | 192,894 | 198,268 | 103% |
Total debt | 84,271 | - | 84,271 | n/a | 84,271 | - | 84,271 | n/a |
(1) See "Non-GAAP Items". |
CONSOLIDATED OPERATIONAL HIGHLIGHTS
For the three months ended June 30, | For the six months ended June 30, | |||||||
2019 | 2018 | Change | % Change | 2019 | 2018 | Change | % Change | |
Operating days(1) | ||||||||
Canada | 274 | 548 | (274) | (50%) | 878 | 1,681 | (803) | (48%) |
United States | 1,008 | 136 | 872 | 641% | 2,148 | 177 | 1,971 | 1114% |
Revenue per operating day(1) | ||||||||
Canada(2) | 31,518 | 31,018 | 500 | 2% | 31,141 | 29,935 | 1,206 | 4% |
United States | 31,874 | 29,544 | 2,330 | 8% | 31,019 | 29,192 | 1,827 | 6% |
Operating and maintenance per operating day(1) | ||||||||
Canada(2) | 21,515 | 22,071 | (556) | (3%) | 21,268 | 21,451 | (183) | (1%) |
United States | 22,743 | 22,831 | (88) | (0%) | 20,557 | 27,068 | (6,511) | (24%) |
Utilization (1) | ||||||||
Canada | 13% | 24% | (11%) | (45%) | 21% | 37% | (16%) | (43%) |
United States(3) | 65% | 50% | 15% | 30% | 70% | 39% | 31% | 79% |
(1) See "Non-GAAP Items". |
(2) Includes AKITA's share of Joint Venture revenue and expenses. See "Non-GAAP Items". |
(3) Utilization in the US is a weighted average for the year based on the number of days each rig was physically in the US and owned by the Company. |
United States Drilling Division
AKITA's 1,008 operating days in the US equated to utilization of 65% in the second quarter of 2019 compared to 136 operating days and 50% utilization in the same period of 2018. In the second quarter of 2019, 15 of AKITA's 17 US based rigs operated, compared to two rigs operating in 2018 in the same quarter. Revenue from AKITA's US division increased to $32,129,000 in the second quarter of 2019 from $4,018,000 in the same period of 2018. In the second half of 2019, the focus for the Company in the US will be to consolidate operations into higher demand basins, further cost rationalization, improving margins and exploring additional opportunities.
Canadian Drilling Division
In Canada, results were much weaker than in the prior year as utilization decreased to 13% (274 operating days) in the second quarter of 2019 from 24% (548 operating days) in the second quarter of 2018. Revenue in the Canadian division decreased to $8,636,000 in the second quarter of 2019 from $16,998,000 in the second quarter of 2018. Regulated production cuts, pipeline access and political and regulatory uncertainty are all weighing heavily on the Canadian energy industry, which in turn is negatively affecting drilling activity. Activity levels in Canada declined sharply in the fourth quarter of 2018 and this has persisted through the first half of 2019. AKITA does not anticipate a change to this low demand environment without an improvement in the factors mentioned above.
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 June 30, 2019 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 ITEMS
This news release references Non-GAAP (Generally Accepted Accounting Principles) items. Revenue per operating day, operating and maintenance expense per operating day, adjusted revenue, adjusted operating and maintenance expense, EBITDA and adjusted funds from operations are all considered Non-GAAP items. Management feels that these Non-GAAP items are useful in assessing the Company's performance. These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) and may not be comparable to similar measures used by other companies. For further information, see "Basis of Analysis in this MD&A and Non-GAAP Items" in AKITA's 2019 first quarter Management's Discussion & Analysis.
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.
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.
The Company's actual results could differ materially from those anticipated in this forward-looking information as a result of regulatory decisions, competitive factors in the industries in which the Company operates, prevailing economic conditions, and other factors, many of which are beyond the control of the Company.
The Company believes that the expectations reflected in the forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.
Any forward-looking information contained in this news release represents the Company's expectations as of the date hereof, and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable securities legislation.
SOURCE AKITA Drilling Ltd.
For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530