CALGARY,
AB, Aug. 3, 2023 /CNW/ - AKITA Drilling
Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. ("AKITA" or the "Company") announces results
for the six months ended June 30,
2023.
The Company's net income increased to $6,177,000 in the second quarter of 2023 from a
loss of $4,252,000 during the same
period of 2022. This is the second most profitable second quarter
in the Company's history (2006 - $7,548,000). Higher day rates drove the improved
earnings as activity levels remained constant between the two
quarters (1,561 operating days in the second quarter of 2023 versus
1,562 in the same period of 2022). Adjusted funds flow from
operations increased 168% to $12,620,000 in the second quarter of 2023, the
highest second quarter funds flow in the Company's history, from
$4,715,000 in the same period od
2022, also driven by improved rates. Net cash from operations
increased to $16,150,000 for the
three months ended June 30, 2023,
compared to $6,189,000 in the same
period of 2022, due to stronger results in the quarter and a
working capital inflow. Debt decreased to $79,670,000 at the end of the second quarter of
2023 from $94,601,000 at the same
time in 2022. In Canada, the
Company operated 9 rigs in the second quarter of 2023 (Q2 2022 – 10
rigs) and 14 rigs in the US (Q2 2022 – 13 rigs). The Company spent
$4,700,000 on routine capital items
in the second quarter of 2023, up from $3,633,000 over the same period in 2022.
Colin Dease, AKITA's Chief
Executive Officer stated: "The strength of AKITA's US operations is
clear to see in our record second quarter results, which have
accelerated our debt repayment schedule, putting us well on track
to achieving our $20 million
repayment target for 2023 having already paid back $14 million in the first half 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,
|
|
2023
|
2022
|
Change
|
%
Change
|
2023
|
2022
|
Change
|
%
Change
|
|
Revenue
|
|
|
58,349
|
42,960
|
15,389
|
36 %
|
123,349
|
87,946
|
35,403
|
40 %
|
|
Operating and
maintenance
expenses
|
|
41,988
|
34,208
|
7,780
|
23 %
|
87,414
|
70,463
|
16,951
|
24 %
|
|
Operating
margin
|
|
16,361
|
8,752
|
7,609
|
87 %
|
35,935
|
17,483
|
18,452
|
106 %
|
|
Margin %
|
|
|
28 %
|
20 %
|
8 %
|
40 %
|
29 %
|
20 %
|
9 %
|
45 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from
operating
activities
|
|
16,150
|
6,189
|
9,961
|
161 %
|
15,736
|
6,436
|
9,300
|
144 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted funds flow
from
operations(1)
|
|
12,620
|
4,715
|
7,905
|
168 %
|
27,779
|
9,713
|
18,066
|
186 %
|
|
Per
share
|
|
|
0.32
|
0.12
|
0.20
|
167 %
|
0.70
|
0.25
|
0.45
|
180 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
6,177
|
(4,252)
|
10,429
|
245 %
|
15,669
|
(7,185)
|
22,854
|
318 %
|
|
Per
share
|
|
|
0.16
|
(0.11)
|
0.27
|
245 %
|
0.40
|
(0.18)
|
0.58
|
322 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
4,700
|
3,633
|
1,067
|
29 %
|
7,204
|
10,045
|
(2,841)
|
(28 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
shares
outstanding
|
|
39,650
|
39,608
|
42
|
0 %
|
39,650
|
39,608
|
42
|
0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
266,330
|
253,266
|
13,064
|
5 %
|
266,330
|
253,266
|
13,064
|
5 %
|
|
Total debt
|
|
|
79,670
|
94,601
|
(14,931)
|
(16 %)
|
79,670
|
94,601
|
(14,931)
|
(16 %)
|
|
(1)See
"Non-GAAP and Supplementary Financial Measures" near the end of
this 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,
|
|
|
|
2023
|
2022
|
Change
|
% Change
|
2023
|
2022
|
Change
|
% Change
|
|
Revenue
Canada
|
|
9,706
|
11,364
|
(1,658)
|
(15 %)
|
29,133
|
27,606
|
1,527
|
6 %
|
|
Revenue from joint
venture drilling rigs
|
9,161
|
5,051
|
4,110
|
81 %
|
16,943
|
10,954
|
5,989
|
55 %
|
|
Flow through
charges(1)
|
(1,180)
|
(560)
|
(620)
|
(111 %)
|
(2,009)
|
(1,642)
|
(367)
|
(22 %)
|
|
Adjusted revenue
Canada(1)
|
17,687
|
15,855
|
1,832
|
12 %
|
44,067
|
36,918
|
7,149
|
19 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance
expenses Canada
|
8,323
|
8,506
|
(183)
|
(2 %)
|
22,395
|
20,928
|
1,467
|
7 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance expenses
from joint venture drilling rigs
|
6,880
|
4,002
|
2,878
|
72 %
|
12,374
|
8,519
|
3,855
|
45 %
|
|
Flow through
charges(1)
|
(1,180)
|
(560)
|
(620)
|
(111 %)
|
(2,009)
|
(1,642)
|
(367)
|
(22 %)
|
|
Adjusted operating and
maintenance
expenses Canada(1)
|
14,023
|
11,948
|
2,075
|
17 %
|
32,760
|
27,805
|
4,955
|
18 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
margin Canada(1)
|
3,664
|
3,907
|
(243)
|
(6 %)
|
11,307
|
9,113
|
2,194
|
24 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin
%(1)
|
|
|
21 %
|
25 %
|
(4 %)
|
(16 %)
|
26 %
|
25 %
|
1 %
|
4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
days
|
|
|
471
|
569
|
(98)
|
(17 %)
|
1,191
|
1,291
|
(100)
|
(8 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenue per
operating day(1)
|
37,552
|
27,865
|
9,687
|
35 %
|
37,000
|
28,596
|
8,404
|
29 %
|
|
Adjusted operating and
maintenance
expenses per operating day(1)
|
29,773
|
20,998
|
8,775
|
42 %
|
27,506
|
21,538
|
5,968
|
28 %
|
|
Adjusted operating
margin per operating
day(1)
|
7,779
|
6,867
|
912
|
13 %
|
9,494
|
7,058
|
2,436
|
35 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization(1)
|
|
|
26 %
|
31 %
|
(5 %)
|
(16 %)
|
33 %
|
36 %
|
(3 %)
|
(8 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Rig count
|
|
|
20
|
20
|
-
|
0 %
|
20
|
20
|
-
|
0 %
|
|
(1)
See "Non-GAAP and Supplementary Financial Measures" near the end of
this release for further detail.
|
|
During the second quarter of 2023, AKITA's adjusted
operating margin fell slightly to $3,664,000 compared to $3,907,000 in the same quarter of 2022. Activity
was the key driver for this decrease as the wild fires in
Alberta forced two rigs to shut
down, which reduced the number of operating days in the quarter to
471 compared to 569 in the second quarter of 2022. AKITA's
utilization over the second quarter of 2023 was 26% compared to the
industry average utilization of 25% over the same period. The high
percentage of pad drilling rigs in AKITA's Canadian fleet is
advantageous in keeping rigs working over break-up, however, in the
second quarter of 2023, wild fires and other environmental factors
delayed rigs that were expected to work over break-up, mitigating
this advantage.
Adjusted revenue in Canada
increased to $17,687,000 in the
second quarter of 2023 from $15,855,000 in the second quarter of 2022 despite
fewer operating days. The day rate increases that were achieved in
the second half of 2022 increased adjusted revenue per operating
day to $37,552 in the second quarter
of 2023, from $27,865 in the same
period of 2022. These rate increases were reflected in all of the
Company's rig categories.
Higher revenue in the quarter was offset by higher adjusted
operating and maintenance expenses which increased to $14,023,000 in the second quarter of 2023 from
$11,948,000 in the same period of
2022. This increase is attributable to an increase in both labour
costs, which is the largest operating cost on a rig, and
maintenance costs which increased due to general price increases as
well as costs incurred for work starting in the third quarter.
United States Drilling Division
|
$Thousands except per
day amounts
|
|
|
|
|
|
|
|
|
|
For the three months
ended June 30,
|
For the six months
ended June 30,
|
|
|
|
2023
|
2022
|
Change
|
% Change
|
2023
|
2022
|
Change
|
% Change
|
|
Revenue US
|
|
48,643
|
31,596
|
17,047
|
54 %
|
94,216
|
60,340
|
33,876
|
56 %
|
|
Flow through
charges(1)
|
(4,499)
|
(3,109)
|
(1,390)
|
(45 %)
|
(9,073)
|
(5,321)
|
(3,752)
|
(71 %)
|
|
Adjusted revenue
US(1)
|
44,144
|
28,487
|
15,657
|
55 %
|
85,143
|
55,019
|
30,124
|
55 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance expenses US
|
33,664
|
25,703
|
7,961
|
31 %
|
65,019
|
49,534
|
15,485
|
31 %
|
|
Flow through
charges(1)
|
(4,499)
|
(3,109)
|
(1,390)
|
(45 %)
|
(9,073)
|
(5,321)
|
(3,752)
|
(71 %)
|
|
Adjusted operating and
maintenance expenses US(1)
|
29,165
|
22,594
|
6,571
|
29 %
|
55,946
|
44,213
|
11,733
|
27 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating margin
US(1)
|
14,979
|
5,893
|
9,086
|
154 %
|
29,197
|
10,806
|
18,391
|
170 %
|
|
Margin
%(1)
|
|
|
34 %
|
21 %
|
13 %
|
62 %
|
34 %
|
20 %
|
14 %
|
70 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
days
|
|
|
1,090
|
993
|
97
|
10 %
|
2,133
|
2,010
|
123
|
6 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenue per
operating day(1)
|
40,499
|
28,688
|
11,811
|
41 %
|
39,917
|
27,373
|
12,544
|
46 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating and
maintenance expenses per operating day(1)
|
26,757
|
22,753
|
4,004
|
18 %
|
26,229
|
21,997
|
4,232
|
19 %
|
|
Adjusted operating
margin per operating day(1)
|
13,742
|
5,935
|
7,807
|
132 %
|
13,688
|
5,376
|
8,312
|
155 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization(1)
|
|
|
80 %
|
68 %
|
12 %
|
18 %
|
79 %
|
69 %
|
10 %
|
14 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Rig count
|
|
|
15
|
16
|
(1)
|
(6 %)
|
15
|
16
|
(1)
|
(6 %)
|
|
(1)
See "Non-GAAP and Supplementary Financial Measures" near the end of
this release for further detail.
|
|
The impact of the US day rate increases which began to take
effect in the second half of 2022, is clear to see when comparing
adjusted revenue of $44,144,000 in
the second quarter of 2023 with adjusted revenue of $28,487,000 over the same period of 2022; a 55%
increase, despite activity levels increasing just 10% over the same
period. Quarter-over-quarter revenue per day has increased 41% from
the second quarter of 2022 to the second quarter of 2023, with the
significant increases occurring in the third and fourth quarters of
2022, and to a lesser extent, in the first quarter of 2023.
Activity increased 97 days in the second quarter of 2023 (1,090)
from the second quarter of 2022 (933), as all 14 of the Company's
currently marketed rigs worked in the quarter, compared to 13
working during the same period of 2022.
Adjusted operating and maintenance costs increased 29% between
the second quarter of 2023 and 2022, driven by increased costs per
day which increased to $26,757 in the
second quarter of 2023 from $22,753
in the second quarter of 2022. The primary driver of the cost per
day increase is increased labour costs. Operating and maintenance
costs were offset in the second quarter of 2023 by the Company's
final $2,000,000 in Employee
Retention Credits received from the IRS in the quarter.
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 2023 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
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 and
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
|
For the three months
ended
June 30,
|
For the six months
ended
June 30,
|
|
2023
|
2022
|
2023
|
2022
|
|
Net cash from operating
activities
|
16,150
|
6,189
|
15,736
|
6,436
|
|
Interest
paid
|
1,531
|
1,408
|
3,709
|
2,438
|
|
Interest
expense
|
(1,584)
|
(1,510)
|
(3,815)
|
(2,578)
|
|
Post-employment
benefits paid
|
79
|
67
|
165
|
136
|
|
Equity income from
joint ventures
|
2,150
|
970
|
4,334
|
2,266
|
|
Change in non-cash
working capital
|
(5,706)
|
(2,409)
|
7,650
|
1,015
|
|
Adjusted funds flow
from operations
|
12,620
|
4,715
|
27,779
|
9,713
|
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. In particular,
forward-looking information in this news release includes, but is
not limited to, references to the outlook for the drilling industry
(including activity levels and day rates), the Company's
relationships and customers and vendors, advantages associated with
the percentage of pad drilling rigs in the Company's Canadian
drilling fleet, the renewal of drilling contracts, and debt
repayment.
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.
Although the Company believes that the expectations reflected
in the forward-looking information are reasonable based on the
information available on the date such statements are made and
processes used to prepare the information, such statements are not
guarantees of future performance and no assurance can be given that
these expectations will prove to be correct. By their nature, these
forward-looking statements involve numerous assumptions, inherent
risks and uncertainties, both general and specific, and therefore
carry the risk that the predictions and other forward-looking
statements will not be realized. Readers of this news release
are cautioned not to place undue reliance on these statements as a
number of important factors could cause actual future results to
differ materially from the plans, objectives, estimates and
intentions expressed in such forward-looking statements.
The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result
of, among other things, prevailing economic conditions; the level
of exploration and development activity carried on by AKITA's
customers, world crude oil prices and North American natural gas
prices; global liquefied natural gas (LNG) demand, weather, access
to capital markets; and government policies. We caution that
the foregoing list of factors is not exhaustive and that while
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,
prior to making a decision to invest in AKITA. Except where
required by law, the Company does not undertake to update any
forward-looking statement, whether written or oral, that may be
made from time to time by it or on its behalf.
SOURCE AKITA Drilling Ltd.