CALGARY, AB,
Aug. 4,
2023 /CNW/ -
SECOND QUARTER
HIGHLIGHTS
- Revenue for the second quarter of 2023 was $432.8 million, a 26 percent increase from the
second quarter of 2022 revenue of $344.1
million.
- Revenue by geographic area:
-
- Canada - $80.6 million, 19 percent of total;
- United States - $276.8 million, 64 percent of total; and
- International - $75.4 million, 17
percent of total.
- Canadian drilling recorded 2,131 operating days in the second
quarter of 2023, a 10 percent decrease from 2,369 operating days in
the second quarter of 2022. Canadian well servicing recorded 11,804
operating hours in the second quarter of 2023, a two percent
decrease from 12,099 operating hours in the second quarter of 2022.
As a result of suspensions of operations related to forest
wildfires Canadian drilling lost approximately 205 operating
days.
- United States drilling
recorded 4,302 operating days in the second quarter of 2023, a one
percent increase from 4,277 operating days in the second quarter of
2022. United States well servicing
recorded 30,647 operating hours in the second quarter of 2023,
which remained consistent with 30,725 operating hours in the second
quarter of 2022.
- International drilling recorded 1,247 operating days in the
second quarter of 2023, a 21 percent increase from 1,030 operating
days recorded in the second quarter of 2022.
- Adjusted EBITDA for the second quarter of 2023 was $116.6 million, a 71 percent increase from
Adjusted EBITDA of $68.3 million for
the second quarter of 2022.
- Funds flow from operations for the second quarter of 2023
increased 43 percent to $116.8
million from $81.5 million in
the second quarter of the prior year.
- General and administrative expense increased 20 percent and
totaled $14.7 million (3.4 percent of
revenue) in the second quarter of 2023, compared with $12.2 million (3.5 percent of revenue) in the
second quarter of 2022.
- Net capital purchases for the second quarter of 2023 were
$53.1 million, consisting of
$3.8 million in upgrade capital and
$52.7 million in maintenance capital,
offset by sale proceeds of $3.3
million. Capital expenditures for the 2023 year are targeted
to be in line with prior guidance of approximately $157.0 million primarily related to maintenance
expenditures. In addition to the maintenance expenditures, there
are certain growth projects for our customers of which $18.3 million has been funded by them. The
Company may continue to consider additional upgrade or growth
projects in response to customer demand upon appropriate contract
terms.
- Total debt, net of cash, has been reduced by $112.5 million since December 31, 2022. Our debt reduction for 2023 is
targeted to be approximately $200.0
million. Our targeted debt reduction for the period
beginning 2023 to the end of 2025 is approximately $600.0 million. If industry conditions change,
these targets could be increased or decreased.
- The Company is pleased to announce it has completed the
publication of its third annual Sustainability Report for the
year-ended December 31, 2022. The
report, available at esg.ensignenergy.com, highlights the
Company's environmental, social, and governance ("ESG")
performance over the past year.
OVERVIEW
Revenue for the second quarter of 2023 was
$432.8 million, a 26 percent increase
from $344.1 million in revenue
for the second quarter of 2022. Revenue for the six months
ended June 30, 2023, was $916.8 million, an increase of 35 percent from
revenue for the six months ended June 30,
2022, of $676.8 million.
Adjusted EBITDA totaled $116.6 million ($0.64 per common share) in the second quarter of
2023, 71 percent higher than Adjusted EBITDA of $68.3 million ($0.40 per common share) in the second quarter of
2022. For the first six months ended June
30, 2023, Adjusted EBITDA totaled $243.9 million ($1.33 per common share), 76 percent higher than
Adjusted EBITDA of $138.3 million
($0.83 per common share) in the first
six months ended June 30, 2022.
Net income attributable to common shareholders
for the second quarter of 2023 was $10.3 million ($0.06 per common share) compared to a net loss
attributable to common shareholders of $28.1
million ($0.17 per common share)
for the second quarter of 2022. Net income attributable to
common shareholders for the six months ended June 30, 2023, was $14.5
million ($0.08 per common
share), compared to a net loss attributable to common shareholders
of $21.6 million ($0.13 per common share) for the six months ended
June 30, 2022.
Funds flow from operations increased 43 percent
to $116.8 million ($0.64 per common share) in the second quarter of
2023 compared to $81.5 million
($0.47 per common share) in the
second quarter of the prior year. Funds flow from operations
increased 49 percent to $235.1
million ($1.28 per common
share) for the six months ended June 30,
2023, compared to $158.2
million ($0.94 per common
share) for the six months ended June 30,
2022.
The outlook for oilfield services continues to be
constructive despite the recent volatility in global crude oil and
natural gas commodity prices and uncertain global economic
conditions. Global inflationary concerns continue to prompt central
banks to tighten monetary policies. Increasing interest rates,
largely resulting from efforts to quell rising inflation, have
contributed to uncertainty for global economies related to
recession risk and economic growth. These factors continue to
impact global energy commodity prices and add uncertainty to the
macro-economic outlook over the short-term. Furthermore, the recent
decline in the US rig count has contributed to activity uncertainty
and rig rate fluctuations over the short-term. However, despite
these short-term headwinds, demand for crude oil continues to
increase year-over-year and OPEC+ nations continue to moderate
supply to respond to market conditions.
Over the near term, there remains uncertainty
regarding the impacts of ongoing hostilities in Ukraine on the global economy, overall global
economic health and recessionary pressures in certain environments.
Furthermore, there are many other factors that may impact the
future demand for crude oil and natural gas, commodity prices, and
the demand for oilfield services.
The Company's operating days remained consistent
in the three months ended June 30,
2023 and higher in the six months ended June 30, 2023, when compared with the same
periods in 2022. Operations were positively impacted in the first
half of 2023 due to supportive industry conditions, driving
activity improvements year-over-year. In the second quarter of
2023, certain drilling programs were temporarily delayed in the
Company's Canadian region due to forest fires that impacted
operational activity.
The average United
States dollar exchange rate was $1.35 for the six months ended June 30, 2023 (2022 - $1.27) versus the Canadian dollar, an increase of
six percent compared to the same period of 2022.
The Company's working capital at June 30,
2023, was a deficit of $1,188.1
million, compared to a deficit of $707.8 million at December
31, 2022. The deficit increase was largely due to the
Company's revolving credit facility (the "Credit Facility")
and unsecured Senior Notes (the "Senior Notes") being
reclassified as current. The Company is in discussion with its
banking syndicate on extending its existing revolving Credit
Facility and on obtaining a new term loan facility, which facility
will be used to retire the Company's Senior Notes due in
April 2024. The Company has not yet
finalized such refinancing or the terms thereof and, if it is
successfully completed, it contemplates completion of such
refinancing before the end of the third quarter of 2023.
The Company's available liquidity, consisting of
cash and available borrowings under its $900.0 million the Credit Facility, was
$171.4 million at June 30, 2023.
This news release contains "forward-looking
information and statements" within the meaning of applicable
securities legislation. For a full disclosure of the
forward-looking information and statements and the risks to which
they are subject, see the "Advisory Regarding Forward-Looking
Statements" later in this news release. This news release
contains references to Adjusted EBITDA and Adjusted EBITDA per
common share. These measures do not have any standardized meaning
prescribed by IFRS and accordingly, may not be comparable to
similar measures used by other companies. The non-GAAP measures
included in this news release should not be considered as an
alternative to, or more meaningful than, the IFRS measures from
which they are derived or to which they are compared. See "Non-GAAP
Measures" later in this news release.
FINANCIAL AND OPERATING
HIGHLIGHTS
(Unaudited, in thousands of Canadian dollars,
except per common share data and operating information)
|
Three months ended June
30
|
Six months ended June
30
|
2023
|
|
2022
|
% change
|
2023
|
2022
|
% change
|
Revenue
|
$ 432,770
|
|
$ 344,123
|
26
|
$ 916,822
|
$ 676,799
|
35
|
Adjusted EBITDA
1
|
116,616
|
|
68,332
|
71
|
243,940
|
138,297
|
76
|
Adjusted EBITDA per
common share 1
|
|
|
|
|
|
|
|
Basic
|
$0.64
|
|
$0.40
|
60
|
$1.33
|
$0.83
|
60
|
Diluted
|
$0.63
|
|
$0.44
|
43
|
$1.32
|
$0.82
|
61
|
Net income (loss)
attributable to common
shareholders
|
10,302
|
|
(28,138)
|
nm
|
14,543
|
(21,551)
|
nm
|
Net income (loss)
attributable to common shareholders
per common share
|
|
|
|
|
|
|
|
Basic
|
$0.06
|
|
$(0.17)
|
nm
|
$0.08
|
$(0.13)
|
nm
|
Diluted
|
$0.06
|
|
$(0.17)
|
nm
|
$0.08
|
$(0.13)
|
nm
|
Cash provided by
operating activities
|
166,771
|
|
99,520
|
68
|
271,345
|
154,076
|
76
|
Funds flow from
operations
|
116,764
|
|
81,497
|
43
|
235,055
|
158,238
|
49
|
Funds flow from
operations per common
share
|
|
|
|
|
|
|
|
Basic
|
$0.64
|
|
$0.47
|
36
|
$1.28
|
$0.94
|
36
|
Diluted
|
$0.63
|
|
$0.52
|
21
|
$1.27
|
$0.94
|
35
|
Total debt, net of
cash
|
1,277,197
|
|
1,357,537
|
(6)
|
1,277,197
|
1,357,537
|
(6)
|
Weighted average common
shares - basic
(000s)
|
183,944
|
|
171,646
|
7
|
183,931
|
167,456
|
10
|
Weighted average common
shares - diluted
(000s)
|
185,031
|
|
173,157
|
7
|
185,388
|
168,325
|
10
|
Drilling
|
2023
|
|
2022
|
% change
|
2023
|
2022
|
% change
|
Number of marketed rigs 2
|
|
|
|
|
|
|
|
Canada 3
|
115
|
|
123
|
(7)
|
115
|
123
|
(7)
|
United States
|
85
|
|
89
|
(4)
|
85
|
89
|
(4)
|
International
4
|
32
|
|
34
|
(6)
|
32
|
34
|
(6)
|
Total
|
232
|
|
246
|
(6)
|
232
|
246
|
(6)
|
|
|
|
|
|
|
|
|
Operating days 5
|
|
|
|
|
|
|
|
Canada 3
|
2,131
|
|
2,369
|
(10)
|
5,931
|
6,097
|
(3)
|
United States
|
4,302
|
|
4,277
|
1
|
8,919
|
7,965
|
12
|
International
4
|
1,247
|
|
1,030
|
21
|
2,351
|
1,903
|
24
|
Total
|
7,680
|
|
7,676
|
0
|
17,201
|
15,965
|
8
|
Well
Servicing
|
2023
|
|
2022
|
% change
|
2023
|
2022
|
% change
|
Number of rigs
|
|
|
|
|
|
|
|
Canada
|
47
|
|
52
|
(10)
|
47
|
52
|
(10)
|
United States
|
47
|
|
48
|
(2)
|
47
|
48
|
(2)
|
Total
|
94
|
|
100
|
(6)
|
94
|
100
|
(6)
|
Operating hours
|
|
|
|
|
|
|
|
Canada
|
11,804
|
|
12,099
|
(2)
|
25,580
|
23,359
|
10
|
United States
|
30,647
|
|
30,725
|
—
|
58,564
|
60,414
|
(3)
|
Total
|
42,451
|
|
42,824
|
(1)
|
84,144
|
83,773
|
—
|
nm
|
- calculation not
meaningful
|
1
|
Adjusted EBITDA and
Adjusted EBITDA per common share are not measures that have any
standardized meaning prescribed by International Financial
Reporting Standards ("IFRS") and accordingly, may not be comparable
to similar measures used by other companies. Non-GAAP measures are
defined in the Non-GAAP Measures section.
|
2
|
Total owned rigs:
Canada - 132, United States - 116, International - 43 (2022 total
owned rigs: Canada - 137, United States - 126, International -
46)
|
3
|
Excludes coring
rigs.
|
4
|
Includes workover rigs.
|
5
|
Defined as contract
drilling days, between spud to rig release.
|
FINANCIAL POSITION AND CAPITAL EXPENDITURES
HIGHLIGHTS
As at ($
thousands)
|
June 30
2023
|
|
December 31
2022
|
|
June 30 2022
|
Working capital
(deficit) 1, 2
|
(1,188,071)
|
|
(707,800)
|
|
102,830
|
Cash
|
44,071
|
|
49,880
|
|
38,994
|
Total debt
3
|
1,321,268
|
|
1,439,575
|
|
1,396,531
|
Total debt, net of cash
3
|
1,277,197
|
|
1,389,695
|
|
1,357,537
|
Total debt and other
long-term financial liabilities 3
|
1,334,344
|
|
1,445,523
|
|
1,408,706
|
Total assets
|
3,030,460
|
|
3,183,904
|
|
3,011,267
|
Total debt to total
debt plus equity ratio 3
|
0.51
|
|
0.53
|
|
0.53
|
1 See non-GAAP Measures
section.
|
2
Change in working capital (deficit) was largely due to the
Company's revolving credit facility and unsecured Senior notes
being classified as current.
|
3
For presentation purposes the Company includes current and
long-term debt under total debt and the comparatives have been
revised to conform with current year's presentation.
|
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
|
2022
|
|
|
% change
|
|
2023
|
|
|
2022
|
|
|
% change
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upgrade/growth
|
3,772
|
|
|
28,495
|
|
|
(87)
|
|
12,028
|
|
|
36,586
|
|
|
(67)
|
Maintenance
|
52,673
|
|
|
25,784
|
|
|
nm
|
|
94,296
|
|
|
49,644
|
|
|
90
|
Proceeds from disposals of property and
equipment
|
(3,299)
|
|
|
(4,189)
|
|
|
(21)
|
|
(3,454)
|
|
|
(46,936)
|
|
|
(93)
|
Net capital
expenditures
|
53,146
|
|
|
50,090
|
|
|
6
|
|
102,870
|
|
|
39,294
|
|
|
nm
|
nm - calculation not
meaningful
|
REVENUE AND OILFIELD SERVICES EXPENSE
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
80,618
|
|
78,684
|
|
2
|
|
220,734
|
|
189,950
|
|
16
|
United
States
|
276,781
|
|
203,507
|
|
36
|
|
551,334
|
|
370,330
|
|
49
|
International
|
75,371
|
|
61,932
|
|
22
|
|
144,754
|
|
116,519
|
|
24
|
Total
revenue
|
432,770
|
|
344,123
|
|
26
|
|
916,822
|
|
676,799
|
|
35
|
Oilfield services
expense
|
301,503
|
|
263,582
|
|
14
|
|
643,702
|
|
515,403
|
|
25
|
Revenue for the three months ended June 30,
2023, totaled $432.8 million, an
increase of 26 percent from the second quarter 2022 of
$344.1 million. Revenue for the six
months ended June 30, 2023, totaled $916.8 million, a 35 percent increase from the
six months ended June 30, 2022.
The increase in total revenue during the second
quarter of 2023 was primarily due to favourable industry
conditions, revenue rate improvements, foreign exchange
translation, and supportive oil commodity prices.
CANADIAN OILFIELD
SERVICES
Revenue increased two percent to $80.6 million for the three months ended
June 30, 2023, from $78.7
million for the three months ended June 30, 2022. The
Company recorded revenue of $220.7
million in Canada for the
six months ended June 30,
2023, an increase of 16 percent from $190.0 million recorded for the six months ended
June 30, 2022.
Canadian revenue accounted for 19 percent of the
Company's total revenue in the second quarter of 2023 (2022 - 23
percent) and 24 percent (2022 - 28 percent) for the first six
months of 2023.
The Company's Canadian drilling operations
recorded 2,131 operating days in the second quarter of 2023,
compared to 2,369 operating days for the second quarter of
2022, a decrease of 10 percent. For the six months ended
June 30, 2023, the Company recorded 5,931 operating days
compared to 6,097 days for the six months ended June 30, 2022,
a decrease of three percent. Canadian well servicing hours
decreased by two percent to 11,804 operating hours in the
second quarter of 2023 compared to 12,099 operating hours in the
corresponding period of 2022. For the six months ended
June 30, 2023, well servicing hours increased by 10 percent to
25,580 operating hours compared with 23,359 operating hours for the
six months ended June 30, 2022.
The operating results for the Company's Canadian
operations in the second quarter of 2023 were negatively impacted
by weather and related events, including forest fires and flooding,
that temporarily delayed certain drilling programs. However, the
financial results for the Company's Canadian operations for the
first half of 2023 were positively impacted by revenue rate
increases year-over-year due to improved industry conditions.
During the first half of 2023, the Company
transferred one drilling rig from the
United States to Canada and
transferred nine under-utilized drilling rigs into its Canadian
operations reserve fleet.
UNITED
STATES OILFIELD SERVICES
The Company's United
States operations recorded revenue of $276.8
million in the second quarter of 2023, an increase of 36
percent from the $203.5 million
recorded in the corresponding period of the prior year. During the
six months ended June 30, 2023, revenue of $551.3 million was recorded, an increase of 49
percent from the $370.3 million
recorded in the corresponding period of the prior year.
The Company's United
States operations accounted for 64 percent of the Company's
revenue in the second quarter of 2023 (2022 - 59 percent)
and 60 percent of the Company's revenue in the first six
months of 2023 (2022 - 55 percent).
Drilling rig operating days increased by one
percent to 4,302 operating days in the second quarter of 2023
from 4,277 operating days in the second quarter of 2022 and
increased by 12 percent to 8,919 operating days in the first six
months ended June 30, 2023 from 7,965
operating days in the first six months ended June 30, 2022. United
States well servicing recorded 30,647 operating hours in the
second quarter of 2023 which remained consistent with 30,725
operating hours recorded in the second quarter of 2022. For the
first half year of 2023, well servicing activity decreased by three
percent to 58,564 operating hours from 60,414 operating hours for
the first half year of 2022.
Overall operating and financial results for the
Company's United States operations
reflect constructive industry conditions, with increased revenue
rates in addition to steady well servicing rig utilization. The
financial results from the Company's United States operations were further
positively impacted by the currency translation, as the United States dollar strengthened relative
to the Canadian dollar during the first six months of 2023.
During the first half of 2023, the Company
transferred one drilling rig from the
United States to Canada. In
addition, the Company transferred four under-utilized drilling rigs
into its United States reserve
fleet and transferred one drilling rig from the reserve fleet to
the marketed fleet.
INTERNATIONAL OILFIELD
SERVICES
The Company's international operations recorded
revenue of $75.4 million in the
second quarter of 2023, a 22 percent increase from the
$61.9 million recorded in the
corresponding period of the prior year. International revenues for
the six months ended June 30, 2023, increased 24 percent to
$144.8 million from $116.5 million recorded for the six months ended
June 30, 2022.
The Company's international operations
contributed 17 percent of the total revenue in the
second quarter of 2023 (2022 - 18 percent) and 16 percent of
the Company's revenue in the first six months of 2023 (2022 - 17
percent).
International operating days for the three months
ended June 30, 2023, totaled 1,247
operating days compared to 1,030 operating days in the same period
of 2022, an increase of 21 percent. For the six months ended
June 30, 2023, international
operating days totaled 2,351 operating days compared to 1,903
operating days for the six months ended June
30, 2022, an increase of 24 percent.
Operating and financial results from
international operations reflect improving industry conditions and
increasing drilling activity. In addition, the Company's
operational activity increased year-over-year as a result of two
Oman drilling rigs commencing new
drilling programs in the fourth quarter of 2022 and a third rig
commencing operations in the second quarter of 2023.
The financial results from the Company's
international operations paid in the
United States dollar were further positively impacted on the
currency translation as the United
States dollar strengthened relative to the Canadian dollar
for the first half of 2023.
During the first half of 2023, the Company
transferred two under-utilized drilling rigs into its international
operations reserve fleet.
DEPRECIATION
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
Depreciation
|
74,835
|
|
68,692
|
|
9
|
|
152,690
|
|
138,672
|
|
10
|
Depreciation expense totaled $74.8 million for the second quarter of 2023
compared with $68.7 million for the
second quarter of 2022, an increase of nine percent.
Depreciation expense for the first six months ended June 30, 2023 increased by 10 percent, to
$152.7 million compared with
$138.7 million for the first six
months ended June 30, 2022. The
increase in depreciation is the result of depreciating recently
upgraded property and equipment and a higher foreign exchange rate
on United States dollar
denominated property and equipment values.
GENERAL AND ADMINISTRATIVE
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
General and
administrative
|
14,651
|
|
12,209
|
|
20
|
|
29,180
|
|
23,099
|
|
26
|
% of revenue
|
3.4
|
|
3.5
|
|
|
|
3.2
|
|
3.4
|
|
|
General and administrative expense
increased 20 percent to $14.7
million (3.4 percent of revenue) for the second quarter of
2023 compared to $12.2 million (3.5
percent of revenue) for the second quarter of 2022. For the six
months ended June 30, 2023, general and administrative expense
totaled $29.2 million (3.2 percent of
revenue) compared to $23.1 million
(3.4 percent of revenue) for the six months ended June 30, 2022. General and administrative
expenses increased due to support of increased operational
activity, annual wage increases and higher foreign exchange rate on
United State dollar translation.
FOREIGN EXCHANGE AND OTHER LOSS
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
2022
|
% change
|
|
2023
|
|
2022
|
% change
|
Foreign exchange and
other loss
|
747
|
4,047
|
(82)
|
|
5,773
|
|
2,702
|
nm
|
nm - calculation not
meaningful
|
Included in this amount is the impact of foreign
currency fluctuations in the Company's subsidiaries that have
functional currencies other than the Canadian dollar.
INTEREST EXPENSE
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
Interest expense
|
31,560
|
|
27,563
|
|
15
|
|
65,958
|
|
52,747
|
|
25
|
Interest expense was incurred on the Company's
$900.0 million Credit Facility, US
$417.5 million Senior Notes and
capital lease obligations.
Interest expense increased by 15 percent for
the second quarter of 2023 compared to the second quarter of 2022.
Interest expense increased by 25 percent for the first six months
ended June 30, 2023, compared to the
same period of 2022. The increases for the first three and six
months of 2023 are the result higher interest rates and the foreign
exchange rate impact on United State dollar translation. Should
Company's financial position improves as anticipated the interest
rate on the Company's Credit Facility is expected to decrease, as
the interest charged is determined using financial metrics.
INCOME TAXES (RECOVERY)
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
Current income taxes
(recovery)
|
767
|
|
(92)
|
|
nm
|
|
1,168
|
|
(1,762)
|
|
nm
|
Deferred taxes income
(recovery)
|
4,496
|
|
(8,124)
|
|
nm
|
|
5,856
|
|
(19,656)
|
|
nm
|
Total income taxes
(recovery)
|
5,263
|
|
(8,216)
|
|
nm
|
|
7,024
|
|
(21,418)
|
|
nm
|
Effective income tax
rate (%)
|
33.8
|
|
22.6
|
|
50
|
|
32.2
|
|
49.9
|
|
(35)
|
nm - calculation not
meaningful
|
The effective income tax rate for the three
months ended June 30, 2023, was 33.8 percent compared to
22.6 percent for the three months ended June 30, 2022.
The effective income tax rate for the six months
ended June 30, 2023, was 32.2 percent compared to
49.9 percent for the six months ended June 30, 2022. The
effective income tax rate in the first half of the current year was
lower than the effective income tax rate in the same period of 2022
as the prior year was significantly impacted by gains on the sale
of certain capital assets in foreign jurisdictions.
FUNDS FLOW FROM OPERATIONS AND WORKING
CAPITAL
($ thousands,
except per common
share data)
|
Three months
ended June 30
|
|
Six months ended June
30
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
Cash provided by
operating activities
|
166,771
|
|
99,520
|
|
68
|
|
271,345
|
|
154,076
|
|
76
|
Funds flow from
operations
|
116,764
|
|
81,497
|
|
43
|
|
235,055
|
|
158,238
|
|
49
|
Funds flow from
operations percommon share
|
$0.64
|
|
$0.47
|
|
36
|
|
$1.28
|
|
$0.94
|
|
36
|
Working capital
1
|
(1,188,071)
|
|
(707,800)
|
|
68
|
|
(1,188,071)
|
|
(707,800)
|
|
68
|
1
Comparative figure as at December 31, 2022
|
During the three months ended June 30, 2023,
the Company generated funds flow from operations of $116.8 million ($0.64 per common share) compared to funds
flow from operations of $81.5 million
($0.47 per common share) for the
three months ended June 30, 2022, an increase of 43 percent.
For the six months ended June 30, 2023, the Company generated
funds flow from operations of $235.1
million ($1.28 per common
share) an increase of 49 percent from $158.2
million ($0.94 per common
share) for the six months ended June 30, 2022. The increase in
funds flow from operations for the six months ended June 30, 2023, compared to the same period of
2022 is largely due to the increase in activity and revenue rates
compared to the prior period as a result of the oil and natural gas
industry's generally positive operating environment.
At June 30, 2023,
the Company's working capital was a deficit of $1,188.1 million, compared to a working capital
deficit of $707.8 million at
December 31, 2022. The deficit was
largely due to the Credit Facility and the Senior Notes being
classified as current. The Company is in discussion with its
banking syndicate on extending its existing revolving Credit
Facility and on obtaining a new term loan facility, which facility
will be used to retire the Company's Senior Notes due in
April 2024. The Company has not yet
finalized such refinancing or the terms thereof and, if it is
successfully completed, it contemplates completion of such
refinancing before the end of the third quarter of 2023..
The Company currently expects funds generated by
operations, combined with current and future credit facilities, to
fully support the Company's current operating and capital
requirements. The Company's Credit Facility provides for total
borrowings of $900.0 million, of
which $127.4 million was undrawn
and available at June 30, 2023.
INVESTING ACTIVITIES
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
Purchase of property
and equipment
|
(56,445)
|
|
(54,279)
|
|
4
|
|
(106,324)
|
|
(86,230)
|
|
23
|
Proceeds from disposals
of property
and equipment
|
3,299
|
|
4,189
|
|
(21)
|
|
3,454
|
|
46,936
|
|
(93)
|
Distribution to
non-controlling interest
|
—
|
|
(1,852)
|
|
nm
|
|
—
|
|
(1,852)
|
|
nm
|
Net change in non-cash
working capital
|
(3,769)
|
|
3,205
|
|
nm
|
|
3,769
|
|
8,902
|
|
(58)
|
Cash used in investing
activities
|
(56,915)
|
|
(48,737)
|
|
17
|
|
(99,101)
|
|
(32,244)
|
|
nm
|
nm - calculation not
meaningful
|
Net purchases of property and equipment for the
second quarter of 2023 totaled $53.1 million (2022 - $50.1 million). Net purchases of property
and equipment during the first six months of 2023 totaled
$102.9 million (2022 -
$39.3 million). The purchase of
property and equipment for the first six months of 2023 consists of
$12.0 million in upgrade and growth
capital and $94.3 million in
maintenance capital.
FINANCING ACTIVITIES
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
2022
|
|
% change
|
|
2023
|
|
2022
|
|
% change
|
Proceeds from long-term
debt
|
28,285
|
|
26,705
|
|
6
|
|
36,547
|
|
28,605
|
|
28
|
Repayments of long-term
debt
|
(93,824)
|
|
(23,460)
|
|
nm
|
|
(137,729)
|
|
(65,394)
|
|
nm
|
Lease obligation
principal
repayments
|
(1,443)
|
|
(2,291)
|
|
(37)
|
|
(10,387)
|
|
(4,189)
|
|
nm
|
Interest
paid
|
(41,653)
|
|
(41,434)
|
|
1
|
|
(64,422)
|
|
(53,887)
|
|
20
|
Issuance of common
shares under
share option plan
|
—
|
|
—
|
|
—
|
|
—
|
|
36
|
|
nm
|
Purchase of common
shares held in
trust
|
(412)
|
|
(405)
|
|
2
|
|
(947)
|
|
(780)
|
|
21
|
Cash used in financing
activities
|
(109,047)
|
|
(40,885)
|
|
nm
|
|
(176,938)
|
|
(95,609)
|
|
85
|
nm - calculation not
meaningful
|
The Company's available bank facilities consist
of a $900.0 million Credit
Facility, of which $127.4
million was available and undrawn as of June 30, 2023. In addition, the Company has US
$50.0 million secured letter of
credit facility, of which US $5.4
million was available as of June 30,
2023.
In the fourth quarter of 2022, the Company
classified its Credit Facility as current. Furthermore, during the
second quarter of 2023, the Company classified the Senior Notes as
current. The Company is in discussion with its banking syndicate on
extending its existing revolving Credit Facility and on obtaining a
new term loan facility, which facility will be used to retire the
Company's Senior Notes due in April
2024. The Company has not yet finalized such refinancing or
the terms thereof and, if it is successfully completed, it
contemplates completion of such refinancing before the end of the
third quarter of 2023.
The Company may at any time and from time to time
acquire Senior Notes for cancellation by means of open market
repurchases or negotiated transactions. The Company is limited in
the acquisition and cancellation of the Senior Notes up to
$25.0 million under applicable
covenants. Senior Notes may be repurchased for redemption in excess
of $25.0 million if certain criteria
are met. No such repurchases occurred during the six months ended
June 30, 2023.
Covenants
The following is a list of the Company's
currently applicable covenants and the calculations as at
June 30, 2023:
|
Covenant
|
|
|
June 30,
2023
|
The Credit
Facility
|
|
|
|
|
Total Debt to
Consolidated EBITDA1
|
≤ 5.00
|
|
|
2.69
|
Consolidated EBITDA to
Consolidated Interest Expense1,2
|
≥ 2.50
|
|
|
3.69
|
Consolidated Senior
Debt to Consolidated EBITDA1,3
|
≤ 2.50
|
|
|
1.52
|
1 Please refer to Non-GAAP
Measures for Consolidated EBITDA definition.
|
2 Consolidated Interest
Expense is defined as all interest expense calculated on twelve
month rolling consolidated basis.
|
3 Consolidated Senior Debt
is defined as Consolidated Total Debt minus Subordinated
Debt.
|
As at June 30,
2023, the Company was in compliance with all covenants
related to the Credit Facility.
The Credit Facility
The Credit Facility agreement, available on
SEDAR+ including amendments, requires that the Company comply with
certain covenants including Consolidated Total Debt to Consolidated
EBITDA ratio, Consolidated EBITDA to Consolidated Interest Expense
ratio and a Consolidated Senior Debt to Consolidated EBITDA ratio
as detailed above.
The Credit Facility also contains certain
covenants that place restrictions on the Company's ability to
repurchase or redeem Senior Notes; to create, incur or assume
additional indebtedness; change the Company's primary business;
enter into mergers or amalgamations; and dispose of property. In
the most recent amendment and restatement of the Credit Facility
agreement, dated December 17, 2021,
permitted encumbrances are limited to $25.0
million.
The Senior Notes
The note indenture governing the Senior Notes,
available on SEDAR+, contains certain restrictions and exemptions
on the Company's ability to pay dividends, purchase and redeem
shares and subordinated debt of the Company, and make certain
restricted investments. Limitations on these restrictions are
tempered by the existence of a number of exceptions to the general
prohibition, including baskets allowing for restricted
payments.
The note indenture also restricts the Company's
ability to incur additional indebtedness if the Fixed Charge
Coverage Ratio determined on a pro forma basis for the most
recently ended four fiscal quarter period for which internal
financial statements are available is not at least 2.0 to 1.0. As
of June 30, 2023, the Company has not
incurred additional indebtedness that would require the Fixed
Charge Coverage Ratio to be calculated. As is the case with
restricted payments, there are a number of exceptions to this
prohibition on the incurrence of indebtedness, including the
incurrence of debt under credit facilities up to the greater of
$900.0 million or 22.5 percent of the
Company's consolidated tangible assets and of additional secured
debt subordinated to the credit facilities up to the greater of US
$125.0 million or four percent of the
Company's consolidated tangible assets.
NEW BUILDS AND MAJOR
RETROFITS
During the first six months ended June 30, 2023, the Company:
- transferred nine, four, and two under-utilized drilling rigs to
its Canadian, United States, and
international operations reserve fleet, respectively;
- transferred one drilling rig from the
United States to Canada;
- transferred one drilling rig from the reserve fleet to the
marketed fleet in the United
States.
The Company is currently directing capital
expenditures primarily to maintenance capital items and selective
rig or fleet upgrades.
OUTLOOK
Industry Overview
The outlook for oilfield services continues to be
constructive despite volatile commodity prices and macro-economic
headwinds. Recessionary pressures, tight fiscal policies, and the
potential for slowing economies and other considerations continue
to influence commodity prices. These factors continue to add
uncertainty to the outlook for crude oil demand and commodity
prices.
Constructively, demand for crude oil continues to
improve year-over-year and OPEC+ nations continually monitor the
oil markets and may implement cuts to production to moderate
supply. Global crude oil prices recently have held steady, with the
benchmark price of West Texas Intermediate ("WTI") averaging
US $72/bbl in May, $70/bbl in June and increasing to average
$76/bbl in July.
Over the short-term, depressed natural gas
commodity prices have impacted the industry rig count in
North America and have contributed
uncertainty to the near-term activity outlook. However, the Company
continues to expect positive oil prices to support relatively
steady oilfield services activity in order to maintain or
potentially grow production in consideration of well productivity
declines and low drilled but uncompleted ("DUC") well
inventory in certain producing areas. Furthermore, positive revenue
rates over the course of 2023 continue to support continuation of
year-over-year past and anticipated future improvements in the
Company's financial results.
Over the short-term, there remains uncertainty
regarding macroeconomic conditions that may impact supply and
demand for, and pricing of, crude oil and natural gas and related
oilfield services. These factors include but are not limited to,
recession risk and global economic health, financial sector stress,
the impact of ongoing hostilities in Ukraine, and the future supply of Russian oil
and natural gas.
The Company remains committed to disciplined
capital allocation and debt repayment. The Company has targeted
approximately $200 million in debt
reduction for the 2023 year. In addition, from the period beginning
2023 to the end of 2025, the Company has targeted debt reduction of
approximately $600 million. If
industry conditions change, this target may be increased or
decreased.
Capital expenditures for the 2023 year are
targeted to be in line with prior guidance of approximately
$157.0 million primarily related to
maintenance expenditures. In addition to the maintenance
expenditures, capital is expended on selective rig enhancements or
relocation projects for certain of the Company's customers of which
$18.3 million has been funded by them
during the first half of 2023. The Company may continue to consider
additional rig relocation, upgrade or growth projects in response
to customer demand and appropriate contract terms.
Canadian Activity
Canadian activity, representing 24 percent of
total revenue in the first half of 2023, decreased in the second
quarter due to seasonal spring-break up and unforeseen weather
events, including forest fires and flooding that temporarily
delayed certain drilling programs. Operations impacted by the fires
or flooding have recommenced. We expect activity to increase in the
third quarter due to supportive industry conditions. We expect
activity in Canada to remain
steady or improve in the second half of 2023 as egress solutions of
additional pipeline capacity for the Canadian market are expected
to come online.
As of August 4,
2023, of our 115 marketed Canadian drilling rigs,
approximately 43 percent are engaged under term contracts of
various durations. Approximately 41 percent of our contracted rigs
have a remaining term of six months or longer, although they may be
subject to early termination.
United States Activity
United States
activity, representing 60 percent of total revenue in the first
half of 2023, declined modestly in the second quarter of 2023
compared to the first quarter of 2023 as a result of contract
turnover and decreased activity in the Company's California region. Operations in California continue to be challenged as
producers are currently working through drilling permit challenges
that have impacted drilling programs over the short-term. The
remaining areas the Company's United
States operations are expected to modestly decline in the
third quarter of 2023. In this regard, the Company currently has
relatively limited exposure to natural gas directed drilling
programs with no active rigs in the Haynesville or Marcellus
basins.
As of August 4,
2023, of our 85 marketed United
States drilling rigs, approximately 61 percent are engaged
under term contracts of various durations. Approximately 12 percent
of our contracted rigs have a remaining term of six months or
longer, although they may be subject to early termination.
International Activity
International activity, representing 16 percent
of total revenue in the first half of 2023, improved in the second
quarter of 2023 as a third Company rig in Oman commenced drilling. The Company currently
has three rigs active in Oman, two
rigs active in Bahrain and two
rigs active in Kuwait. Financial
and operational performance of all seven active rigs in the
Company's Middle East segment are
expected to remain steady in the third quarter of 2023.
Overall, the Company's international activity is
expected to improve in the third quarter of 2023 as operations are
expected to increase from seven to eight active rigs in
Australia. We expect operations in
Australia to further increase in
the fourth quarter of 2023 continuing into 2024. Operations in
Argentina, with two Company rigs
active, are expected remain steady in the third quarter of
2023.
As of August 4,
2023, of our 32 marketed international drilling rigs,
approximately 53 percent, were engaged under term contracts of
various durations. Approximately 94 percent of our contracted rigs
have a remaining term of six months or longer, although they may be
subject to early termination.
RISK AND UNCERTAINTIES
The Company is subject to numerous risks and
uncertainties. A discussion of certain risks faced by the Company
may be found hereinbelow and under the "Risk Factors" section of
the Company's Annual Information Form ("AIF") and the "Risks
and Uncertainties" section of the Company's Management's Discussion
& Analysis ("MD&A") for the year ended December 31, 2022, which are available under the
Company's SEDAR+ profile at www.sedarplus.com.
Other than as described within this document, the
Company's risk factors and management of those risks have not
changed substantially from those as disclosed in the AIF.
Additional risks and uncertainties not presently known by the
Company, or that the Company does not currently anticipate or deem
material, may also impair the Company's future business operations
or financial condition. If any such potential events, whether
described in the risk factors in this document or the Company's AIF
or otherwise actually occur, or described events intensify, overall
business, operating results and the financial condition of the
Company could be materially adversely affected.
CONFERENCE CALL
A conference call will be held to discuss the
Company's second quarter 2023 results at 10:00 a.m. MDT (12:00 p.m.
EDT) on Friday, August 4,
2023. The conference call number is 1-416-764-8659 (in
Toronto) or 1-888-664-6392
(outside Toronto). The conference
call reservation number is: 11051240. A taped recording of the
conference call will be available until August 11, 2023, by dialing 1-416-764-8677 (in
Toronto) or 1-888-390-0541
(outside Toronto) and entering the
reservation number 051240#. A live broadcast may be accessed
through the Company's website at
www.ensignenergy.com/presentations.
Ensign Energy Services Inc. is an international
oilfield services contractor and is listed on the Toronto Stock
Exchange under the trading symbol ESI.
Ensign Energy Services
Inc.
Consolidated Statements of Financial Position
As at
|
|
June 30
2023
|
|
December 31
2022
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
|
$
44,071
|
|
$
49,880
|
Accounts
receivable
|
|
298,703
|
|
359,933
|
Inventories, prepaid,
investments and other
|
|
53,902
|
|
60,758
|
Income taxes
receivable
|
|
—
|
|
40
|
Total current
assets
|
|
396,676
|
|
470,611
|
Property and
equipment
|
|
2,430,120
|
|
2,516,923
|
Deferred income
taxes
|
|
203,664
|
|
196,370
|
Total assets
|
|
$
3,030,460
|
|
$ 3,183,904
|
Liabilities
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
accruals
|
|
$
245,320
|
|
$
268,243
|
Share-based
compensation
|
|
7,345
|
|
11,735
|
Income taxes
payable
|
|
4,663
|
|
4,423
|
Current portion of
lease obligation
|
|
6,151
|
|
11,324
|
Current portion of
long-term debt
|
|
1,321,268
|
|
882,686
|
Total current
liabilities
|
|
1,584,747
|
|
1,178,411
|
|
|
|
|
|
Share-based
compensation
|
|
4,986
|
|
13,635
|
Long-term
debt
|
|
—
|
|
556,889
|
Lease
obligations
|
|
7,803
|
|
5,948
|
Income tax
payable
|
|
5,273
|
|
5,394
|
Deferred income
taxes
|
|
145,483
|
|
134,857
|
Total
liabilities
|
|
1,748,292
|
|
1,895,134
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Shareholders'
capital
|
|
268,467
|
|
267,790
|
Contributed
surplus
|
|
22,720
|
|
23,398
|
Accumulated other
comprehensive income
|
|
254,909
|
|
276,053
|
Retained
earnings
|
|
736,072
|
|
721,529
|
Total shareholders'
equity
|
|
1,282,168
|
|
1,288,770
|
Total liabilities and
shareholders' equity
|
|
$
3,030,460
|
|
$ 3,183,904
|
Ensign Energy Services
Inc.
Consolidated Statements of Income
(Loss)
|
|
Three months
ended
|
|
Six months
ended
|
|
|
|
|
|
|
|
June 30
2023
|
|
June 30 2022
|
|
June 30
2023
|
|
June 30 2022
|
(Unaudited - in
thousands of Canadian dollars, except
per common share data)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
432,770
|
|
$
344,123
|
|
$
916,822
|
|
$
676,799
|
Expenses
|
|
|
|
|
|
|
|
|
Oilfield
services
|
|
301,503
|
|
263,582
|
|
643,702
|
|
515,403
|
Depreciation
|
|
74,835
|
|
68,692
|
|
152,690
|
|
138,672
|
General and
administrative
|
|
14,651
|
|
12,209
|
|
29,180
|
|
23,099
|
Share-based
compensation
|
|
(6,146)
|
|
3,560
|
|
(4,421)
|
|
13,959
|
Foreign exchange and
other loss
|
|
747
|
|
4,047
|
|
5,773
|
|
2,702
|
Total
expenses
|
|
385,590
|
|
352,090
|
|
826,924
|
|
693,835
|
Income (loss) before
interest expense, accretion of
deferred financing charges and other gains and
income taxes
|
47,180
|
|
(7,967)
|
|
89,898
|
|
(17,036)
|
|
|
|
|
|
|
|
|
|
Gain on asset
sale
|
|
(2,160)
|
|
(1,354)
|
|
(2,268)
|
|
(31,296)
|
Interest
expense
|
|
31,560
|
|
27,563
|
|
65,958
|
|
52,747
|
Accretion of deferred
financing charges
|
|
2,199
|
|
2,199
|
|
4,399
|
|
4,401
|
Income (loss) before
income taxes
|
|
15,581
|
|
(36,375)
|
|
21,809
|
|
(42,888)
|
Income taxes
(recovery)
|
|
|
|
|
|
|
|
|
Current income taxes
(recovery)
|
|
767
|
|
(92)
|
|
1,168
|
|
(1,762)
|
Deferred income taxes
(recovery)
|
|
4,496
|
|
(8,124)
|
|
5,856
|
|
(19,656)
|
Total income taxes
(recovery)
|
|
5,263
|
|
(8,216)
|
|
7,024
|
|
(21,418)
|
Net income
(loss)
|
|
$
10,318
|
|
$
(28,159)
|
|
$
14,785
|
|
$
(21,470)
|
Net income (loss)
attributable to:
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
10,302
|
|
(28,138)
|
|
14,543
|
|
(21,551)
|
Non-controlling
interests
|
|
16
|
|
(21)
|
|
242
|
|
81
|
|
|
10,318
|
|
(28,159)
|
|
14,785
|
|
(21,470)
|
Net income (loss)
attributable to common
shareholders per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.06
|
|
$
(0.17)
|
|
$
0.08
|
|
$
(0.13)
|
Diluted
|
|
$
0.06
|
|
$
(0.17)
|
|
$
0.08
|
|
$
(0.13)
|
Ensign Energy Services
Inc.
Consolidated Statements of Cash Flows
|
|
Three months
ended
|
|
Six months
ended
|
|
|
|
|
|
|
|
June 30
2023
|
|
June 30 2022
|
|
June 30
2023
|
|
June 30 2022
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
10,318
|
|
$
(28,159)
|
|
$
14,785
|
|
$
(21,470)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation
|
|
74,835
|
|
68,692
|
|
152,690
|
|
138,672
|
Gain on asset
sale
|
|
(2,160)
|
|
(1,354)
|
|
(2,268)
|
|
(31,296)
|
Share-based
compensation, net cash settlements
|
|
71
|
|
1,823
|
|
(5,892)
|
|
12,222
|
Unrealized foreign exchange and other
|
|
(4,555)
|
|
18,857
|
|
(473)
|
|
22,618
|
Accretion of deferred
financing charges
|
|
2,199
|
|
2,199
|
|
4,399
|
|
4,401
|
Interest
expense
|
|
31,560
|
|
27,563
|
|
65,958
|
|
52,747
|
Deferred income taxes
(recovery)
|
|
4,496
|
|
(8,124)
|
|
5,856
|
|
(19,656)
|
Funds flow from
operations
|
|
116,764
|
|
81,497
|
|
235,055
|
|
158,238
|
Net change in non-cash
working capital
|
|
50,007
|
|
18,023
|
|
36,290
|
|
(4,162)
|
Cash provided by
operating activities
|
|
166,771
|
|
99,520
|
|
271,345
|
|
154,076
|
Investing
activities
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
(56,445)
|
|
(54,279)
|
|
(106,324)
|
|
(86,230)
|
Proceeds from disposals
of property and equipment
|
|
3,299
|
|
4,189
|
|
3,454
|
|
46,936
|
Distribution to
non-controlling interest
|
|
—
|
|
(1,852)
|
|
—
|
|
(1,852)
|
Net change in non-cash
working capital
|
|
(3,769)
|
|
3,205
|
|
3,769
|
|
8,902
|
Cash used in
investing activities
|
|
(56,915)
|
|
(48,737)
|
|
(99,101)
|
|
(32,244)
|
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from long-term
debt
|
|
28,285
|
|
26,705
|
|
36,547
|
|
28,605
|
Repayments of long-term
debt
|
|
(93,824)
|
|
(23,460)
|
|
(137,729)
|
|
(65,394)
|
Lease obligation
principal repayments
|
|
(1,443)
|
|
(2,291)
|
|
(10,387)
|
|
(4,189)
|
Interest
paid
|
|
(41,653)
|
|
(41,434)
|
|
(64,422)
|
|
(53,887)
|
Issuance of common
shares under share option plan
|
|
—
|
|
—
|
|
—
|
|
36
|
Purchase of common
shares held in trust
|
|
(412)
|
|
(405)
|
|
(947)
|
|
(780)
|
Cash used in
financing activities
|
|
(109,047)
|
|
(40,885)
|
|
(176,938)
|
|
(95,609)
|
|
Net increase
(decrease) in cash
|
|
809
|
|
9,898
|
|
(4,694)
|
|
26,223
|
|
|
|
|
|
|
|
|
|
Effects of foreign
exchange on cash
|
|
(1,588)
|
|
(610)
|
|
(1,115)
|
|
(534)
|
Cash – beginning of
period
|
|
44,850
|
|
29,706
|
|
49,880
|
|
13,305
|
Cash – end of
period
|
|
$
44,071
|
|
$
38,994
|
|
$
44,071
|
|
$
38,994
|
Ensign Energy Services
Inc.
Non-GAAP Measures
Adjusted EBITDA per common share and Consolidated
EBITDA. These measures do not have any standardized meaning
prescribed by IFRS and accordingly, may not be comparable to
similar measures used by other companies.
Adjusted EBITDA is used by management and
investors to analyze the Company's profitability based on the
Company's principal business activities prior to how these
activities are financed, how assets are depreciated, amortized and
how the results are taxed in various jurisdictions. Additionally,
in order to focus on the core business alone, amounts are removed
related to foreign exchange, share-based compensation expense, the
sale of assets and fair value adjustments on financial assets and
liabilities, as the Company does not deem these to relate to its
core drilling and well services business. Adjusted EBITDA is not
intended to represent net loss as calculated in accordance with
IFRS.
ADJUSTED
EBITDA
|
Three months ended June
30
|
|
|
Six months ended June
30
|
($
thousands)
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
Income (loss) before
income taxes
|
15,581
|
|
|
(36,375)
|
|
|
21,809
|
|
|
(42,888)
|
Add-back/(deduct):
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
31,560
|
|
|
27,563
|
|
|
65,958
|
|
|
52,747
|
Accretion of deferred
financing charges
|
2,199
|
|
|
2,199
|
|
|
4,399
|
|
|
4,401
|
Depreciation
|
74,835
|
|
|
68,692
|
|
|
152,690
|
|
|
138,672
|
Share-based compensation
|
(6,146)
|
|
|
3,560
|
|
|
(4,421)
|
|
|
13,959
|
Gain on
asset sale
|
(2,160)
|
|
|
(1,354)
|
|
|
(2,268)
|
|
|
(31,296)
|
Foreign
exchange and other loss
|
747
|
|
|
4,047
|
|
|
5,773
|
|
|
2,702
|
Adjusted
EBITDA
|
116,616
|
|
|
68,332
|
|
|
243,940
|
|
|
138,297
|
Consolidated EBITDA
Consolidated EBITDA, as defined in the Company's
Credit Facility agreement, is used in determining the Company's
compliance with its covenants. The Consolidated EBITDA is
substantially similar to Adjusted EBITDA. Consolidated EBITDA is
calculated on a rolling twelve-month basis.
Working Capital
Working capital is defined as current assets less
current liabilities as reported on the consolidated statements of
financial position.
ADVISORY REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements herein constitute
forward-looking statements or information (collectively referred to
herein as "forward-looking statements") within the meaning of
applicable securities legislation. Forward-looking statements
generally can be identified by the words "believe", "anticipate",
"expect", "plan", "estimate", "target", "continue", "could",
"intend", "may", "potential", "predict", "should", "will",
"objective", "project", "forecast", "goal", "guidance", "outlook",
"effort", "seeks", "schedule", "contemplates" or other expressions
of a similar nature suggesting future outcome or statements
regarding an outlook.
Disclosure related to expected future commodity
pricing or trends, revenue rates, equipment utilization or
operating activity levels, operating costs, capital expenditures
and other prospective guidance provided herein, including, but not
limited to, information provided in the "Funds Flow from Operations
and Working Capital" section regarding the Company's expectation
that funds generated by operations combined with current and future
credit facilities will support current operating and capital
requirements, information provided in the "New Builds and Major
Retrofits" section, information provided in the "Financial
Instruments" section regarding Venezuela and information provided in the
"Outlook" section regarding the general outlook for the remainder
of 2023 and beyond, are examples of forward-looking statements.
These statements are not representations or
guarantees of future performance and are subject to certain risks
and unforeseen results. The reader should not place undue reliance
on forward-looking statements as there can be no assurance that the
plans, initiatives, projections, anticipations or expectations upon
which they are based will occur. The forward-looking statements are
based on current assumptions, expectations, estimates and
projections about the Company and the industries and environments
in which the Company operates, which speak only as of the date such
statements were made or as of the date of the report or document in
which they are contained. These assumptions include, among other
things: the fluctuation in commodity prices may pressure customers
to modify their capital programs; the status of current
negotiations with the Company's customers and vendors; customer
focus on safety performance; existing term contracts that may not
be renewed or are terminated prematurely; the Company's ability to
provide services on a timely basis and successfully bid on new
contracts; successful integration of acquisitions; the general
stability of the economic and political environments in the
jurisdictions where we operate, pandemics, and impacts of
geopolitical events such as the hostilities between Ukraine and the Russian Federation and the global community
responses thereto.
The forward-looking statements are subject to
known and unknown risks, uncertainties and other factors that could
cause the actual results, performance or achievements to be
materially different from any future results, performance or
achievements expressed or implied by such forward-looking
statements. Such risk factors include, among others: general
economic and business conditions which will, among other things,
impact demand for and market prices of the Company's services and
the ability of the Company's customers to pay accounts receivable
balances; volatility of and assumptions regarding commodity prices;
foreign exchange exposure; fluctuations in currency and interest
rates; inflation; economic conditions in the countries and regions
in which the Company conducts business; political uncertainty and
civil unrest; the Company's ability to implement its business
strategy; impact of competition and industry conditions; risks
associated with long-term contracts; force majeure events;
artificial intelligence development and implementation; cyber
attacks; pandemics; determinations by Organization of Petroleum
Exporting Countries ("OPEC") and other countries (OPEC and
various other countries are referred to as "OPEC+")
regarding production levels; loss of key customers; litigation
risks, including the Company's defence of lawsuits; risks
associated with contingent liabilities and potential unknown
liabilities; availability and cost of labour and other equipment,
supplies and services; business interruption and casualty losses;
the Company's ability to complete its capital programs; operating
hazards and other difficulties inherent in the operation of the
Company's oilfield services equipment; availability and cost of
financing and insurance; access to credit facilities and debt
capital markets; availability of sufficient cash flow to service
and repay our debts; impairment of capital assets; the Company's
ability to amend or comply with covenants under the credit facility
and other debt instruments; actions by governmental authorities;
impact of and changes to laws and regulations impacting the Company
and the Company's customers, and the expenditures required to
comply with them (including safety and environmental laws and
regulations and the impact of climate change initiatives on capital
and operating costs); safety performance; environmental
contamination; shifting interest to alternative energy sources;
environmental activism; the adequacy of the Company's provision for
taxes; tax challenges; the impact of, and the Company's response to
future pandemics; workforce and reliance on key management;
technology; cybersecurity risks; seasonality and weather; risks
associated with acquisitions and ability to successfully integrate
acquisitions; risks associated with internal controls over
financial reporting; the impact of the ongoing hostilities between
Ukraine and the Russian Federation and the global community
responses thereto and other risks and uncertainties affecting the
Company's business, revenues and expenses.
In addition, the Company's operations and levels
of demand for its services have been, and at times in the future
may be, affected by political risks and developments, such as
expropriation, nationalization, or regime change, and by national,
regional and local laws and regulations such as changes in taxes,
royalties and other amounts payable to governments or governmental
agencies, environmental protection regulations, pandemics,
pandemics mitigation strategies and the impact thereof upon the
Company, its customers and its business, ongoing hostilities
between Ukraine and the
Russian Federation, related
potential future impact on the supply of oil and natural gas to
Europe by Russia and the impact of global community
responses to the ongoing conflict, and governmental energy
policies, laws, rules or regulations that limit, restrict or impede
exploration, development, production, transportation or consumption
of hydrocarbons and/or incentivize development, production,
transportation or consumption of alternative fuel or energy
sources.
Should one or more of these risks or
uncertainties materialize, or should any of the Company's
assumptions prove incorrect, actual results from operations may
vary in material respects from those expressed or implied by the
forward-looking statements. The impact of any one factor on a
particular forward-looking statement is not determinable with
certainty as such factors are interdependent upon other factors,
and the Company's course of action would depend upon its assessment
of the future considering all information then available.
Unpredictable or unknown factors not discussed herein could also
have material adverse effects on forward-looking statements.
For additional information refer to the "Risks
and Uncertainties" section herein and the "Risk Factors" section of
the Company's Annual Information Form for the year ended
December 31, 2022 available on SEDAR
at www.sedar.com. Readers are cautioned that the lists of important
factors contained herein are not exhaustive. Unpredictable or
unknown factors not discussed herein could also have material
adverse effects on forward-looking statements.
The forward-looking statements contained herein
are expressly qualified in their entirety by this cautionary
statement. The forward-looking statements contained herein are made
as of the date hereof and the Company undertakes no obligation to
update publicly or revise any forward-looking statements or
information, whether as a result of new information, future events
or otherwise, except as required by law.
SOURCE Ensign Energy Services Inc.