Return to corporate site

AKITA Drilling Ltd. Announces 2010 Earnings and Funds Flow

Mar 18, 2011

CALGARY, March 18 /CNW/ - Earnings for the year ended December 31, 2010 were $5,701,000 or $0.31 per share on revenue of $112,050,000.  Comparative figures for 2009 were $8,380,000 or $0.46 per share on revenue of $106,263,000.  Funds flow from operations for the current year was $26,833,000 as compared to $23,960,000 in 2009 while cash flow from operations for 2010 was $37,441,000 as compared to $29,235,000 in 2009.

Earnings for the three months ended December 31, 2010 were $3,439,000 or $0.18 per share on revenue of $33,598,000 compared to $3,165,000 or $0.18 per share on revenue of $25,815,000 for the corresponding period in 2009.  Funds flow from operations for the quarter ended December 31, 2010 was $8,751,000 as compared to $5,990,000 for the corresponding period in 2009 while cash flow from operations for the quarter ended December 31, 2010 was $12,267,000 as compared to $534,000 for the corresponding period in 2009.

The Company's rig utilization in 2010 was 37.8%, an improvement of 6.7 percentage points over 2009's utilization rate of 31.1%.  Many of AKITA's triple sized rigs have deeper capacities than desired by most operators in the drilling environment that existed in 2010, however, management expects these rigs to be more active once operators allocate larger budgets to drilling deeper gas wells.

A substantial portion of AKITA's capital spending during 2010 was directed to converting three conventional rigs into pad rigs, upgrading the capacity of an existing pad rig and the construction of a new pad rig (still under construction at year-end).  In total, the Company incurred $23,575,000 on these five projects.  Pad rigs have been a key focus market since 2003 and are desirable assets for drilling heavy oil, shale gas and other prospects that involve drilling multiple wells where wellheads are in close proximity to one another.  At the end of 2010, the Company had 11 rigs with pad capabilities.

The Company's confidence in the industry and commitment to maintaining a high quality fleet were key to AKITA's $31,624,000 net capital spending during the year, compared to $11,835,000 in net capital spending during 2009.  The construction of new pad rigs, conversion of existing conventional rigs into pad rigs and upgrades to existing pad rigs formed the bulk of AKITA's 2010 capital spending.  In addition to pad rigs, the Company invested in a major upgrade to one of its shallow capacity conventional rigs. 

AKITA's continuing strong cash position provides the Company with the flexibility to evaluate a broad range of alternatives to enhance shareowner value including meeting the Company's long-term strategy of having significant investments in purpose built rigs.  AKITA's board of directors and management are actively considering appropriate investment alternatives, including a number of strategic options that may require longer lead times to develop.

AKITA maintains a commitment to safety that permeates all levels of the organization, and again this commitment translated into positive results.  During 2010, the Company achieved the lowest rate of reportable incidents since AKITA's inception. 

On October 22, 2010, the Canadian Association of Oilwell Drilling Contractors provided its industry drilling forecast for 2011 estimating the drilling of 11,811 wells, compared to 12,145 wells drilled in 2010.  The current year estimate was based upon commodity price assumptions of US $80 per barrel for crude oil and Cdn $4.00 per mcf for natural gas.  Despite the lower number of wells projected in the 2011 forecast, compared to the 2010 actual wells drilled, the industry is anticipating 10.8% more drilling days in 2011 as a result of anticipating more horizontal wells than drilled in 2010.  Although winter drilling activity levels to date appear to support this forecast, management remains cautious regarding post-break up drilling levels given the continuing natural gas price weakness.

Selected financial information for the Company is as follows:

Consolidated Balance Sheets            
December 31($000's of Canadian Dollars)       2010   2009
Current assets            
  Cash and cash equivalents       $ 37,964   $ 34,142
  Term deposits       10,000   18,000
  Accounts receivable       33,379   28,523
  Income taxes recoverable       8   330
  Other       222   421
        81,573   81,416
Restricted cash       2,500   5,000
Capital assets       158,625   147,799
        $ 242,698   $ 234,215
Current liabilities            
  Accounts payable and accrued liabilities       $ 18,872   $ 10,123
  Dividends payable       1,269   1,277
  Deferred revenue       -   197
        20,141   11,597
Future income taxes       20,036   20,041
Pension liability       1,229   1,131
        41,406   32,769
Class A and Class B Shareholders' Equity            
Class A and Class B shares       23,447   23,376
Contributed surplus       2,512   2,271
Accumulated other comprehensive income       (303)   (354)
Retained earnings       175,636   176,153
        201,292   201,446
        $ 242,698   $ 234,215

Consolidated Statements of Earning and Retained Earnings            
Year ended December 31 ($000's of Canadian Dollars, except per share amounts)       2010   2009
Revenue       $ 112,050   $ 106,263
Costs and expenses            
  Operating and maintenance       70,081   67,649
  Depreciation       20,873   17,476
  Selling and administrative       13,464   9,942
        104,418   95,067
Revenue less costs and expenses       7,632   11,196
Other income (expense)            
  Interest income       773   524
  Gain on sale of joint venture interests in rigs and other assets       75   396
  Gain (loss) on foreign currency translation       30   (215)
        878   705
Earnings before income taxes       8,510   11,901
Income taxes            
  Current       2,818   2,096
  Future       (9)   1,425
        2,809   3,521
Net earnings       5,701   8,380
Retained earnings, beginning of year       176,153   172,878
Dividends declared       (5,079)   (5,105)
Adjustment on repurchase and cancellation of share capital       (1,139)   -
Retained earnings, end of year       $ 175,636   $ 176,153
Earnings per Class A and Class B share            
  Basic       $ 0.31   $ 0.46
  Diluted       $ 0.31   $ 0.46

Consolidated Statements of Cash Flows            
Year ended December 31 ($000's of Canadian Dollars)       2010   2009
Operating activities            
Net earnings       $ 5,701   $ 8,380
Non-cash items included in earnings            
  Depreciation       20,873   17,476
  Future income taxes       (5)   1,223
  Expense (recovery) for defined benefit pension plan       98   (2,723)
  Stock options charged to expense       241   -
  Gain on sale of joint venture interests in rigs and other assets       (75)   (396)
Funds flow from operations       26,833   23,960
Change in non-cash working capital       10,608   5,275
        37,441   29,235
Investing activities            
Capital expenditures       (31,837)   (12,341)
Reduction in cash restricted for loan guarantees       2,500  
Proceeds on sales of joint venture interests in rigs and other assets       213   506
Change in non-cash working capital       1,601   (20,031)
        (27,523)   (31,866)
Financing activities            
Dividends paid       (5,079)   (5,105)
Proceeds received on exercise of stock options       280   64
Repurchase of share capital       (1,348)   -
        (6,147)   (5,041)
Foreign currency translation       51   (354)
Increase (decrease) in cash       3,822   (8,026)
Cash position, beginning of year       34,142   42,168
Cash position, end of year       $ 37,964   $ 34,142
Interest paid during the year       $ 25   $ 66
Income taxes paid during the year       $ 2,497   $ 2,825

Consolidated Statements of Comprehensive Income            
Year ended December 31 ($000's of Canadian Dollars)       2010   2009
Net earnings       $ 5,701   $ 8,380
Other comprehensive income            
  Foreign currency translation adjustment       51   (354)
Comprehensive income       $ 5,752   $ 8,026

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.

For further information:

Mr. Murray Roth
Vice President Finance