AKITA announces second quarter results

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AKITA announces second quarter results

by ahnationtalk on August 3, 202214 Views

CALGARY, AB, Aug. 2, 2022  – AKITA Drilling Ltd. (TSX: AKT.A)

AKITA Drilling Ltd. (“AKITA” or the “Company”) announces results for the six months ended June 30, 2022.

Results for the second quarter of 2022 improved over the second quarter of 2021 as the demand for drilling services in both Canada and the US continued to strengthen, resulting in a 130% increase in the Company’s revenue for the second quarter of 2022 compared to the same period in 2021. The Company’s net loss decreased to $4,252,000 from $6,108,000 and adjusted funds flow from operations increased to $4,718,000 in the second quarter of 2022 from $1,056,000 in the same period of 2021. Activity in the Company’s Canadian division increased 258% with 569 operating days in the second quarter of 2022, compared to 159 operating days in the second quarter of 2021. Activity also improved in the Company’s US Division which achieved 993 operating days in the second quarter of 2022, compared to 615 operating days in the second quarter of the year prior (up 61% year over year). In the second quarter of 2022, the Company spent $3,633,000 on capital, primarily on routine capital, compared to $3,138,000 in the same period of 2021. Debt remained unchanged at $95,000,000 over the first and second quarters of 2022.

With activity levels continuing to rise, the Company has secured meaningful day rate increases as current contracts are renewed throughout the remainder of the year. These rate increases will be most impactful in the third and fourth quarters of 2022 and are expected to significantly improved results.

Linda Southern-Heathcott, AKITA’s Executive Chair and Chief Executive Officer stated: “As expected, the second quarter of 2022 showed the start of the impact of rate increases on the Company’s results. We expect that additional rate increases will positively impact results in the second half of the year and anticipate stronger results for the balance of the year.”

CONSOLIDATED FINANCIAL HIGHLIGHTS

$Thousands except per share amounts 

For the three months ended June 30, 

For the six months ended June 30, 

2022

2021

Change

 % Change

2022

2021

Change

 % Change

Revenue

42,960

18,651

24,309

130 %

87,946

45,822

42,124

92 %

Operating and maintenance expenses

34,208

13,900

20,308

146 %

70,463

33,912

36,551

108 %

Operating margin

8,752

4,751

4,001

84 %

17,483

11,910

5,573

47 %

Margin %

20 %

25 %

(5 %)

(20 %)

20 %

26 %

(6 %)

(23 %)

Net cash from (used in) operating activities

6,189

10,118

(3,929)

(39 %)

6,436

4,426

2,010

45 %

Adjusted funds flow from operations(1)

4,716

1,056

3,660

347 %

9,713

4,775

4,938

103 %

  Per share

0.12

0.03

0.09

300 %

0.25

0.12

0.13

108 %

Net loss

(4,252)

(6,108)

1,856

30 %

(7,185)

(9,759)

2,574

26 %

  Per share

(0.11)

(0.15)

0.04

27 %

(0.18)

(0.25)

0.07

28 %

Capital expenditures

3,633

3,138

495

16 %

10,045

4,742

5,303

112 %

Weighted average shares outstanding

39,608

39,608

0 %

39,608

39,608

0 %

Total assets

253,266

240,306

12,960

5 %

253,266

240,306

12,960

5 %

Total debt

94,601

74,467

20,134

27 %

94,601

74,467

20,134

27 %

(1) See “Non-GAAP and Supplementary Financial Measures” near the end of this news release for further detail.

Canadian Drilling Division

$Thousands except per day amounts

For the three months ended June 30, 

For the six months ended June 30, 

2022

2021

Change 

% Change

2022

2021

Change 

% Change

Revenue Canada

11,364

1,816

9,548

526 %

27,606

10,058

17,548

174 %

Revenue from joint venture drilling rigs

5,051

2,390

2,661

111 %

10,954

8,268

2,686

32 %

Flow through charges(1)

(560)

(828)

268

32 %

(1,642)

(1,051)

(591)

(56 %)

Adjusted revenue Canada(1)

15,855

3,378

12,477

369 %

36,918

17,275

19,643

114 %

Operating and maintenance expenses Canada

8,506

675

7,831

1160 %

20,928

5,990

14,938

249 %

Operating and maintenance expenses from joint venture drilling rigs

4,002

2,292

1,710

75 %

8,519

7,302

1,217

17 %

Flow through charges(1)

(560)

(828)

268

32 %

(1,642)

(1,051)

(591)

(56 %)

Adjusted operating and maintenance expenses Canada(1) 

11,948

2,139

9,809

459 %

27,805

12,241

15,564

127 %

Adjusted operating margin Canada(1)

3,907

1,239

2,668

215 %

9,113

5,034

4,079

81 %

Margin %(1)

25 %

37 %

(12 %)

(32 %)

25 %

29 %

(4 %)

(14 %)

Operating days

569

159

410

258 %

1,291

650

641

99 %

Adjusted revenue per operating day(1)

27,865

21,245

6,620

31 %

28,596

26,577

2,019

8 %

Adjusted operating and maintenance per operating day(1)

20,998

13,453

7,545

56 %

21,538

18,832

2,706

14 %

Adjusted operating margin per operating day(1)

6,867

7,792

(925)

(12 %)

7,058

7,745

(687)

(9 %)

Utilization(1)

31 %

9 %

22 %

244 %

36 %

18 %

18 %

100 %

Rig count

20

20

0 %

20

20

0 %

(1)  See “Non-GAAP and Supplementary Financial Measures” near the end of this news release for further detail.

During the second quarter of 2022, AKITA achieved 569 operating days in Canada, which corresponds to a utilization rate of 31%, compared to 9% (159 days) in the second quarter of 2021, a 258% increase in operating days quarter over quarter. Industry average in the second quarter of 2022 was 24% and 15% in the second quarter of 2021.

Adjusted revenue in Canada increased to $15,855,000 in the second quarter of 2022 from $3,378,000 in the second quarter of 2021. Adjusted revenue per operating day increased to $27,865 in the second quarter of 2022 from $21,245 in the same period of 2021 due to higher day rates. The Company’s oil sands rigs, a market segment that has rebounded in 2022, were the key driver for the increased activity and revenue in the quarter.

Higher revenue in the quarter was offset by higher adjusted operating and maintenance expenses which increased to $11,948,000 in the first quarter of 2022 from $2,139,000 in the same period of 2021. This increase is primarily attributable to higher activity as operating costs are directly tied to activity levels but also due to the increase in adjusted operating and maintenance expenses per day which rose to $20,998 in the three months ended June 30, 2022 from $13,453 in the same period of 2021. The increase in the per day operating cost in 2022 is due to the Company no longer receiving the Canadian Emergency Wage Subsidy (“CEWS”), compared to 2021 when the Company received $1,477,000 of CEWS in the second quarter of 2021, which effectively reduced adjusted operating and maintenance expense by $9,289 per day.

United States Drilling Division

$Thousands except per day amounts

For the three months ended June 30, 

For the six months ended June 30, 

2022

2021

Change 

% Change

2022

2021

Change 

% Change

Revenue US

31,596

16,835

14,761

88 %

60,340

35,764

24,576

69 %

Flow through charges(1)

(3,109)

(1,729)

(1,380)

(80 %)

(5,321)

(3,469)

(1,852)

(53 %)

Adjusted revenue US(1)

28,487

15,106

13,381

89 %

55,019

32,295

22,724

70 %

Operating and maintenance expenses US

25,703

13,224

12,479

94 %

49,534

27,922

21,612

77 %

Flow through charges(1)

(3,109)

(1,729)

(1,380)

(80 %)

(5,321)

(3,469)

(1,852)

(53 %)

Adjusted operating and maintenance expenses US(1) 

22,594

11,495

11,099

97 %

44,213

24,453

19,760

81 %

Adjusted operating margin US(1)

5,893

3,611

2,282

63 %

10,806

7,842

2,964

38 %

Margin %(1)

21 %

24 %

(3 %)

(13 %)

20 %

24 %

(4 %)

(17 %)

Operating days

993

615

378

61 %

2,010

1,319

691

52 %

Adjusted revenue per operating day(1)

28,688

24,563

4,125

17 %

27,373

24,484

2,889

12 %

Adjusted operating and maintenance per operating day(1)

22,753

18,691

4,062

22 %

21,997

18,539

3,458

19 %

Adjusted operating margin per operating day(1)

5,935

5,872

63

1 %

5,376

5,945

(569)

(10 %)

Utilization(1)

68 %

40 %

28 %

70 %

69 %

43 %

26 %

60 %

Rig count

16

17

(1)

(6 %)

16

17

(1)

(6 %)

(1)  See “Non-GAAP and Supplementary Financial Measures” near the end of this news release for further detail.

With the demand for drilling services increasing in the US gradually throughout 2021 and into 2022, operating days increased in AKITA’s US division by 61%, to 993 (68% utilization) in the second quarter of 2022 from 615 (40% utilization) in the same period of 2021.

The results in the US were similar to Canada in that revenue increased significantly due to higher activity, however, operating margin decreased to 21% due to inflationary cost increases.  Adjusted revenue in the US increased by 89% to $28,488,000 in the second quarter of 2022 from $15,106,000 in the second quarter of 2021. This increase is due mainly to higher activity levels but also an increase in revenue per day which rose 17% quarter over quarter. While moderate day rate increases were seen in the first and second quarter of 2022 on select rigs, it is anticipated that the majority of the Company’s rigs will see rate increases that will impact results in the second half of the year. Revenue in the US accounted for 64% of the Company’s adjusted revenue in the second quarter of 2022 (2021 – 82%).

Operating and maintenance costs are correlated to activity levels and increased to $22,594,000 in the second quarter of 2022 from $11,495,000 in the second quarter of 2021. This increase, which was mainly from higher activity levels, but also from increased labour and supply costs in all areas, increased adjusted operating and maintenance costs per day to $22,753 in the second quarter of 2022 from $18,691 in the same period of 2021.

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, 2022 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 in Canada

Adjusted revenue and adjusted 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 adjusted revenue and adjusted operating and maintenance expenses in AKITA’s Canadian 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 adjusted revenue per day and adjusted 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 Revenue and Operating and Maintenance Expenses in United States

Excluded from adjusted revenue and adjusted operating and maintenance expenses in AKITA’s 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 adjusted revenue per day and adjusted 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
June 30,

For the six months ended
June 30,

2022

2021

2022

2021

Net cash from operating activities

6,189

10,118

6,436

4,426

Interest paid

1,408

826

2,438

1,636

Interest expense

(1,510)

(916)

(2,578)

(1,804)

Post-employment benefits paid

67

37

136

60

Equity income from joint ventures

970

56

2,266

809

Change in non-cash working capital

(2,408)

(9,065)

1,015

(352)

Adjusted funds flow from operations

4,716

1,056

9,713

4,775

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

For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530

NT4

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