CALGARY, AB, March 14, 2022 /CNW/ - AKITA Drilling
Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. ("AKITA" or the "Company") was more active
in 2021 than in 2020 as the impact of the restrictions designed to
reduce the spread of the global pandemic eased, and the price of
oil and natural gas recovered, increasing 37% and 67%, respectfully
over the course of the year. The significant improvements in
commodity prices increased demand for drilling services in both
Canada and the United States ("US") and resulted in
improved activity for both AKITA's Canadian and US operations. The
Company's focus in 2021 shifted towards rig reactivations and
positioning AKITA's fleet to participate fully in the 2022 drilling
year that was anticipated to be strong and which is already off to
a favorable start with the active rig count in the US crossing
above 600 active rigs in early January and industry utilization in
Canada above both 2019, 2020 and
2021 levels at the start of 2022. The Company spent $16,416,000 on capital expenditures in 2021
(compared to $7,793,000 in 2020)
primarily at the end of the year on rig reactivations and Level-4
inspections that enabled it to activate eleven rigs in Canada to start 2022, compared to eight rigs
operating in Canada in the month
of January during each of the previous three years.
Similarly, the Company operated a total of thirteen rigs in the US
in January of 2022, compared with nine the year prior.
Linda Southern-Heathcott, AKITA's
Executive Chair and Chief Executive Officer stated: "Coming off
collapsed oil and gas commodity prices and low activity levels that
characterized the prior year, 2021, in many ways, was a year of
recovery for the Company. Capital was spent to reactivate rigs that
had been idle and utilization levels improved materially for the
both AKITA's Canadian and US divisions. Despite improving
activity levels, - low day rates persisted throughout most of the
year while supply chain disruptions increased the cost of
operations. However, by the end of 2021 it became clear that
industry fundamentals were improving, and we are working to secure
day rate increases throughout 2022. We expect 2022 to
continue to strengthen through the year."
The Company announces annual results for the year ended
December 31, 2021. AKITA's net loss
for the year ended December 31, 2021
was $20,990,000 (net loss of
$0.53 per share (basic and diluted))
on revenue of $110,088,000 compared
to a net loss of $93,274,000
($2.35 loss per share (basic and
diluted)) on revenue of $119,664,000
in 2020. The Company recorded an asset impairment loss of
$80,000,000 in 2020. Adjusting for
the asset impairment loss, the Company's net loss in 2020 was
$20,674,000 (net loss of $0.52 per share (basic and diluted)). Net cash
used in operating activities for 2021 was $3,461,000 compared to net cash from operating
activities of $22,860,000 in 2020 and
adjusted funds flow from operations(1) decreased to
$7,454,000 in 2021 from $10,322,000 in the prior year.
CONSOLIDATED FINANCIAL HIGHLIGHTS
|
$Thousands except per
share amounts
|
|
2021
|
2020
|
Change
|
%
Change
|
|
Revenue
|
|
110,088
|
119,664
|
(9,576)
|
(8%)
|
|
Operating
expenses
|
|
89,835
|
91,855
|
(2,020)
|
(2%)
|
|
Operating
margin(1)
|
|
20,253
|
27,809
|
(7,556)
|
(27%)
|
|
Margin
%(1)
|
|
18%
|
23%
|
(5%)
|
(22%)
|
|
|
|
|
|
|
|
Net Cash From (Used
In) Operating Activities
|
|
(3,461)
|
22,860
|
(26,321)
|
(115%)
|
|
Adjusted funds flow
from operations(1)
|
|
7,454
|
10,322
|
(2,868)
|
(28%)
|
|
Per
share
|
|
0.19
|
0.26
|
(0.07)
|
(27%)
|
|
|
|
|
|
|
|
Net loss
|
|
20,990
|
93,274
|
(72,284)
|
(77%)
|
|
Per
share
|
|
0.53
|
2.35
|
(1.82)
|
(77%)
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
16,416
|
7,593
|
8,823
|
116%
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
39,608
|
39,608
|
-
|
0%
|
|
|
|
|
|
|
|
Total
assets
|
|
247,574
|
251,521
|
(3,947)
|
(2%)
|
|
Total debt
|
|
86,156
|
74,303
|
11,853
|
16%
|
|
(1) See
"Non-GAAP and Supplementary Financial Measures" near the end of
this new release for further detail.
|
|
United States Operations
|
$ Thousands except
per day amounts (CAD)
|
2021
|
2020
|
Change
|
% Change
|
|
Revenue
US
|
81,798
|
91,198
|
(9,400)
|
(10%)
|
|
Flow through
charges
|
(10,374)
|
(10,821)
|
447
|
4%
|
|
Adjusted revenue
US(1)
|
71,424
|
80,377
|
(8,953)
|
(11%)
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance expenses US
|
68,371
|
70,901
|
(2,530)
|
(4%)
|
|
Flow through
charges
|
(10,374)
|
(10,821)
|
447
|
4%
|
|
Adjusted operating
and maintenance expenses US(1)
|
57,997
|
60,080
|
(2,083)
|
(3%)
|
|
|
|
|
|
|
Adjusted operating
margin(1)
|
13,427
|
20,297
|
(6,870)
|
(34%)
|
|
Margin %
(1)
|
19%
|
25%
|
(6%)
|
(24%)
|
|
|
|
|
|
|
Operating
days
|
2,871
|
2,555
|
316
|
12%
|
|
|
|
|
|
|
Adjusted revenue per
operating day(1)
|
24,878
|
31,459
|
(6,581)
|
(21%)
|
|
Adjusted operating
and maintenance per operating day(1)
|
20,201
|
23,515
|
(3,314)
|
(14%)
|
|
Adjusted operating
margin per operating day(1)
|
4,677
|
7,944
|
(3,267)
|
(41%)
|
|
|
|
|
|
|
Utilization
(1)
|
46%
|
41%
|
5%
|
12%
|
|
|
|
|
|
|
Rig count
|
16
|
17
|
(1)
|
(6%)
|
|
(1) See
"Non-GAAP and Supplementary Financial Measures" near the end of
this new release for further detail.
|
|
Activity levels in the US over 2021 improved for both AKITA and
in industry over the low levels seen in 2020, albeit at a measured
pace. Operating days increased 12% to 2,871 in 2021 from 2,555 in
2020. The active rig count for AKITA grew from nine rigs in January
of 2021, to 13 rigs by the end of 2021.
Despite the increase in operating days, adjusted revenue
decreased to $71,424,000 in 2021 from
$80,377,000 in 2020. The
decrease in adjusted revenue per day, to $24,878 in 2021 from $31,459 in 2020 drove the decrease in total
adjusted revenue. High day rates in 2019 that carried into the
first half of 2020 declined significantly in the second half of
2020, due to the demand destruction resulting from efforts to
mitigate the spread of the global pandemic. Low day rates persisted
through the first three quarters of 2021 causing average day rates
to decrease 21% year over year. The Company also received contract
cancelation revenue in the first quarter of 2020 of $1,655,000, which contributed to higher day rates
in 2020. Revenue in the US accounted for 62% of the Company's total
2021 adjusted revenue, down from 76% in 2020.
Adjusted operating and maintenance expenses decreased to
$57,997,000 in 2021 from $60,080,000 in 2020 despite higher operating days
in 2021. Adjusted operating and maintenance costs per day decreased
to $20,201 in 2021 from $23,515 in 2020 due to two factors. First, the
rigs that operated in 2021 had steadier drilling programs
throughout the year. Second, move costs incurred in 2020 of
$1,000,000 added to adjusted
operating and maintenance costs for the year.
Canadian Operations
|
$Thousands except per
day amounts
|
2021
|
2020
|
Change
|
% Change
|
|
Revenue
Canada
|
28,290
|
28,466
|
(176)
|
(1%)
|
|
Revenue from joint
venture drilling rigs
|
15,893
|
5,094
|
10,799
|
212%
|
|
Flow through
charges
|
(3,512)
|
(6,835)
|
3,323
|
49%
|
|
Adjusted revenue
Canada(1)
|
40,671
|
26,725
|
13,946
|
52%
|
|
|
|
|
|
|
Operating and
maintenance expenses Canada
|
21,489
|
20,954
|
535
|
3%
|
|
Operating and
maintenance expenses from joint venture drilling rigs
|
13,626
|
4,352
|
9,274
|
213%
|
|
Flow through
charges
|
(3,512)
|
(6,835)
|
3,323
|
49%
|
|
Adjusted operating
and maintenance expenses
Canada(1)
|
31,603
|
18,471
|
13,132
|
71%
|
|
|
|
|
|
|
Adjusted operating
margin(1)
|
9,068
|
8,254
|
814
|
10%
|
|
Margin
%(1)
|
22%
|
31%
|
(9%)
|
(29%)
|
|
|
|
|
|
|
Operating
days
|
1,594
|
945
|
649
|
69%
|
|
|
|
|
|
|
Adjusted revenue per
operating day(1)
|
25,515
|
28,280
|
(2,765)
|
(10%)
|
|
Adjusted operating
and maintenance per operating day(1)
|
19,826
|
19,546
|
280
|
1%
|
|
Adjusted operating
margin per operating day(1)
|
5,689
|
8,734
|
(3,045)
|
(35%)
|
|
|
|
|
|
|
Utilization(1)
|
22%
|
13%
|
9%
|
69%
|
|
|
|
|
|
|
Rig count
|
20
|
20
|
-
|
0%
|
|
(1)
See "Non-GAAP and Supplementary Financial Measures" near the end of
this news release for further detail.
|
|
During 2021, AKITA achieved 1,594 operating days in Canada, which corresponds to an annual
utilization rate of 22%, compared to a 2021 industry average of 25%
and a 2020 utilization rate for the Company of 13% (945 days). The
increase in AKITA's operating days in 2021 compared to 2020 is
attributable to the increase in activity for AKITA's oil sands
triple pad rigs that achieved 496 more days than the previous year
as activity in the oil sands improved in the second half of
2021.
Canadian adjusted revenue of $40,671,000 in 2021 was 52% higher than 2020
revenue of $26,725,000, due to
increased activity in 2021 but was offset by lower average day
rates. Adjusted revenue per day decreased to $25,515 in 2021 from $28,280 in 2020. Lower adjusted revenue per
day in Canada compared to 2020 was
due to two factors: the mix of rigs working in 2021, with more
lower margin rigs working in 2021, and because labour contract
revenue earned in 2020 was not earned in 2021. Together,
these factors decreased revenue per day by $1,034. Included in the Canadian
operating results for 2021 is AKITA's share of revenue and costs
from its joint ventures, as AKITA provides the same drilling
services through its joint venture drilling rigs as it does through
its wholly-owned rigs.
Adjusted operating and maintenance expenses are tied to activity
levels and increased to $31,603,000
in 2021 from $18,471,000 in 2020,
equal to a 69% increase in operating costs, which is in-line with
the 69% increase in operating days. On a per day basis, adjusted
operating and maintenance costs remained essentially flat, year
over year. Increased costs in the industry for supplies as well as
labour costs, were offset by the Canadian Emergency Wage Subsidy
("CEWS") of $3,450,000 in 2021
compared to $1,820,349 in 2020.
FURTHER INFORMATION
This news release shall be used as preparation for reading the
full disclosure documents. AKITA's audited consolidated financial
statements and management's discussion and analysis for the year
ended December 31, 2021 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
Operating and Maintenance Expenses in Canada
Revenue and 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 revenue and
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 revenue
per day and 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 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 revenue per day and 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
|
2021
|
2020
|
|
Net cash from
operating activities
|
(3,461)
|
22,860
|
|
Income tax
recoverable
|
-
|
(275)
|
|
Current income tax
expense (recovery)
|
-
|
116
|
|
Interest
paid
|
3,422
|
5,479
|
|
Interest
expense
|
(3,553)
|
(5,637)
|
|
Post-employment
benefits paid
|
198
|
104
|
|
Equity income from
joint ventures
|
1,981
|
650
|
|
Change in non-cash
working capital
|
8,867
|
(12,975)
|
|
Adjusted funds flow
from operations
|
7,454
|
10,322
|
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
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.