CALGARY, March 25, 2020 /CNW/ - Stampede Drilling Inc.
("Stampede" or the "Corporation") (TSX-V: SDI) announces today its
financial and operational results for the three months and year
ended December 31, 2019.
The following should be read in conjunction with the
Corporation's audited consolidated financial statements and the
notes thereto for the three months and year ended December 31, 2019 and related management's
discussion and analysis, which are available on SEDAR at
www.sedar.com.
All amounts or dollar figures are denominated in thousands of
Canadian dollars except for per share amounts, number of drilling
rigs, and operating days, or unless otherwise noted.
Estimates and forward-looking information are based on
assumptions of future events and actual results may vary from these
estimates. See "Forward-Looking Information" in this press release
for additional details.
2019 OPERATIONAL OVERVIEW
2019 marked the Corporation's second full calendar year of
operations for its drilling rig division combined with the sale of
the directional drilling division in Q2 2019. The drilling
rig division continued its 2018 positive momentum with 2019 revenue
of $23,697, up $7,669 (48%) compared to 2018, and 2019 annual
Adjusted EBITDA of $4,126, up
$1,066 (35%) from 2018. The increase
in annual Adjusted EBITDA was a direct result of the Corporation's
2019 annual rig utilization of 34%, 55% higher than the CAODC's
2019 annual utilization of 22%. Net loss from continuing operations
was $1,247, $1,159 lower than 2018's net loss of $88 as a result of higher general and
administrative expenses from higher allocation of corporate
expenses.
In 2019, the Corporation increased its operating days by 33% as
compared to 2018, as we continued our geographic expansion into
Alberta with the reallocation of
assets from Saskatchewan. The
reallocation allowed the Corporation to expand and diversify its
customer base while increasing revenue in 2019 by 48% from
2018.
The Corporation now has 13 drilling rigs consisting of ten
complementary heavy telescopic drilling rigs, one cantilever triple
drilling rig, one light telescopic double rig, and one cantilever
double drilling rig. In 2019, the Corporation operated 8 of its 10
heavy telescopic double drilling rigs and one light telescopic
double.
RECENT ECONOMIC DEVELOPMENTS
First quarter 2020 global events have significantly impacted the
global economy and downgraded the Corporation's near-term
expectations of the energy industry. The spread of the COVID-19
virus in combination with OPEC's inability to maintain global oil
supply levels during early March 2020
has significantly undermined commodity prices, customer cash flows
and investor confidence. Further, the influence of these
recent developments impact customers' capital spending budgets and
their potential ability to pay for work completed on a timely
basis.
OUTLOOK
The recent development of the macro-economic factors of the
COVID-19 virus, instability created by OPEC's inability to maintain
the global oil supply and the resulting impact to commodity prices,
have created an adverse effect on the energy industry.
The Corporation expects Canadian oil and gas producers will
continue to be faced with the challenge of exporting their products
due to uncertainty surrounding the timing of the Trans Mountain
pipeline expansion project as well as delays related to other
pipeline projects such as the Keystone XL pipeline. This, combined
with the rise of the COVID-19 virus, global oil supply from OPEC
and continued government mandated crude oil production cuts, will
result in capital spending reductions by our customers relative to
historical levels.
As a result of the recent developments, the Corporation has
reduced its 2020 remaining capital spending forecast to
$0 and has eliminated all
nonessential repairs and maintenance of its entire fleet of
rigs. The Corporation will focus on continued cost cutting,
cash collections from our customers and debt repayment to maintain
our balance sheet.
FINANCIAL HIGHLIGHTS
FOURTH QUARTER 2019 SUMMARY (Compared with the fourth
quarter 2018)
- Revenue from continuing operations of $6,705, up 11% from $6,025;
- Gross margin from continuing operations of $2,116, down 14% from $2,454;
- Adjusted EBITDA from continuing operations of $1,139, down 20% from an Adjusted EBITDA
$1,423;
- Net loss from continuing operations of ($104), down 120% from ($520);
- Net loss from combined operations of ($154), up 92% from ($1,995)
YEAR ENDED DECEMBER 31, 2019
SUMMARY (Compared with the year ended December 31, 2018)
- Revenue from continuing operations of $23,697, up 48% from $16,028;
- Gross margin from continuing operations of $8,197 up 45% from $5,647;
- Adjusted EBITDA from continuing operations of $4,126, up 35% from $3,060;
- Net loss from continuing operations of ($1,247), down 1,317% from net loss of
$($88);
- Net loss from combined operations of ($245), up 94% from a net loss of ($4,124)
|
Three months
ended
December 31,
|
|
Years ended
December 31,
|
|
(000's CAD $
except per share amounts)
|
2019
|
2018
|
%
Change
|
|
2019
|
2018
|
%
Change
|
2017
|
Continuing
operations
|
|
|
|
|
|
|
|
|
Revenue
|
6,705
|
6,025
|
11%
|
|
23,697
|
16,028
|
48%
|
1,453
|
Direct operating
expenses
|
4,589
|
3,571
|
29%
|
|
15,500
|
10,381
|
49%
|
971
|
Gross margin
(1)
|
2,116
|
2,454
|
(14%)
|
|
8,197
|
5,647
|
45%
|
482
|
Net income (loss)
from continuing operations
|
(104)
|
520
|
(120%)
|
|
(1,247)
|
(88)
|
1,317%
|
(372)
|
Basic and diluted per
share
|
(0.00)
|
0.00
|
nm
|
|
(0.01)
|
(0.00)
|
1,303%
|
(0.01)
|
Adjusted EBITDA
(1)
|
1,139
|
1,423
|
(20%)
|
|
4,126
|
3,060
|
35%
|
269
|
Weighted average
common shares outstanding
|
132,046
|
131,600
|
0%
|
|
131,851
|
130,541
|
1%
|
43,099
|
Weighted average
diluted common shares outstanding
|
132,046
|
131,857
|
0%
|
|
131,851
|
130,541
|
1%
|
43,099
|
Combined
operations (2)
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
(154)
|
(1,995)
|
(92%)
|
|
(245)
|
(4,124)
|
(94%)
|
(6,875)
|
Basic and diluted per
share
|
(0.00)
|
(0.02)
|
nm
|
|
(0.00)
|
(0.03)
|
(100%)
|
(0.16)
|
Adjusted EBITDA
(1)
|
1,056
|
1,085
|
(3%)
|
|
4,589
|
1,776
|
158%
|
(189)
|
Capital
expenditures
|
2,295
|
1,720
|
33%
|
|
9,580
|
16,599
|
(42%)
|
17,696
|
nm - not
meaningful
|
|
(1) Refer to "Non-GAAP Measures" for
further information.
|
|
(2) Combined operations represents
the aggregated results of both continuing and discontinued
operations.
|
|
|
Years ended
December 31,
|
(000's CAD $
except operating days)
|
2019
|
2018(1)
|
%
Change
|
|
|
|
|
Revenue
|
23,697
|
16,028
|
48%
|
Direct operating
expenses
|
15,500
|
10,381
|
49%
|
Gross margin
(2)
|
8,197
|
5,647
|
45%
|
Gross margin %
(2)
|
35%
|
35%
|
0%
|
Net loss from
continuing operations
|
(1,247)
|
(88)
|
1,317%
|
General and
administrative expenses
|
4,782
|
2,663
|
80%
|
Adjusted EBITDA
(2)
|
4,126
|
3,060
|
35%
|
Drilling rig
operating days
|
1,143
|
859
|
33%
|
Drilling rig revenue
per operating day
|
20.7
|
18.7
|
11%
|
Drilling rig
utilization
|
34%
|
29%
|
17%
|
CAODC industry
average utilization (3)
|
22%
|
29%
|
(24%)
|
(1) The
comparative period has been restated to reflect discontinued
operations as discussed in Note 6.
|
(2) Refer to "Non-GAAP measures" for
further information.
|
(3) Source: The Canadian Association
of Oilwell Drilling Contractors ("CAODC"). The CAODC industry
average is
based on operating days divided by total available drilling
days.
|
RESULTS OF CONTINUING OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2019
- In 2019, revenue was $23,697, an
increase of $7,669 (48%) compared to
$16,028 for the year ended
December 31, 2018. The increase was
as a result of an increase in operating days due to the higher
average rig count in 2019, and an increase in revenue per day of
11% from $18.7 for the year ended
December 31, 2018 to $20.7 in the comparable 2019 period. The increase
in revenue per day was related to the higher dayrates in
Alberta compared to in
Saskatchewan as a result of an
increase in the average rig count in Alberta.
- Operating days in the drilling rig division of 1,143 days for
2019 was a 33% increase over the 859 operating days in 2018, as a
result of the increase in rig count during the period and continued
positive momentum in the drilling rig division. The drilling rig
utilization for 2019 was 34%, 55% above the CAODC industry average
utilization rate of 22%. The increase in average active rig count
allowed the Corporation to diversify geographically into the
Alberta market and expand its
customer base resulting in increased drilling rig utilization in
the current year.
- For the year ended December 31,
2019, gross margin as a percentage of revenue for the year
ended December 31, 2019 was 35%,
consistent with the corresponding period in 2018.
- General and administrative expenses for the year ended
December 31, 2019 were $4,782 up $2,119
(80%) from $2,663 for the comparable
period of 2018, as a result of increased headcount and the higher
allocation of corporate expenses related to salaries, legal, IT,
and rent as part of the Corporation's continuing operations.
- For the year ended December 31,
2019, Adjusted EBITDA was $4,126 a $1,066
(35%) increase from $3,060 as
compared to the corresponding 2018 period, as a result of the
increase in active rig count which was partially offset by the
increased general and administrative expenses compared to
2018.
Other Items
|
Years ended
December 31,
|
(000's CAD
$)
|
2019
|
2018
|
%
Change
|
Gain from disposition
of property and equipment
|
8
|
172
|
(95%)
|
Gain from equipment
lost in hole
|
19
|
-
|
nm
|
Finance
costs
|
(684)
|
(406)
|
68%
|
Other
income
|
123
|
18
|
583%
|
Foreign exchange
loss
|
19
|
(5)
|
(480%)
|
Transaction
costs
|
(156)
|
(683)
|
(77%)
|
Other
items
|
(671)
|
(904)
|
(26%)
|
nm - not
meaningful
|
|
|
|
For the year ended December 31,
2019, finance costs were $684,
a $278 (68%) increase from
$406 as compared to the corresponding
2018 period. The increase was due to higher 2019 debt levels
associated with the Corporation's line of credit. The higher 2019
debt levels were a result of increased capital spend and working
capital as a result of increased activity for the year ended
December 31, 2019 compared to the
corresponding 2018 period.
For the year ended December 31,
2019, other income was $123 as
compared to $18 in the corresponding
2018 period. Other income is comprised of rent collections from the
Corporation's subleases.
For the year ended December 31,
2019, there was a decrease in transaction costs of
$527 (77%) from $683 as compared to the corresponding 2018
period. Transaction costs for 2019 consist of non-capitalizable
amounts related to US start-up costs of $156. Transaction costs for 2018 represent
non-capitalizable amounts directly related to drilling rig
acquisitions which consist of due diligence and external legal fees
and US start-up costs.
FOURTH QUARTER RESULTS OF CONTINUING OPERATIONS
|
Three months ended
December 31,
|
(000's CAD $
except operating days)
|
2019
|
2018(1)
|
%
Change
|
|
|
|
|
Revenue
|
6,705
|
6,025
|
11%
|
Direct operating
expenses
|
4,589
|
3,571
|
29%
|
Gross margin
(2)
|
2,116
|
2,454
|
(14%)
|
Gross margin %
(2)
|
32%
|
41%
|
(22%)
|
Net income (loss)
from continuing operations
|
(104)
|
520
|
(120%)
|
General and
administrative expenses
|
1,093
|
1,069
|
2%
|
Adjusted EBITDA
(2)
|
1,139
|
1,423
|
(20%)
|
Drilling rig
operating days
|
289
|
292
|
(1%)
|
Drilling rig revenue
per operating day
|
23.2
|
20.6
|
13%
|
Drilling rig
utilization
|
31%
|
35%
|
(11%)
|
CAODC industry
average utilization
|
23%
|
28%
|
(18%)
|
(1) The
comparative period has been restated to reflect discontinued
operations as discussed in Note 6.
|
(2) Refer to "Non-GAAP measures" for
further information.
|
(3) Source: The Canadian Association
of Oilwell Drilling Contractors ("CAODC"). The CAODC industry
average is
based on operating days divided by total available drilling
days.
|
- Revenue in the fourth quarter of 2019 was $6,705, an increase of $680 (11%) compared to $6,025 in the fourth quarter of 2018. The
increase was as a result in the increased average rig count and an
increase in revenue per day of 13% from $20.6 in the fourth quarter of 2018 to
$23.2 in the comparable 2019 period.
The increase in revenue per day was related to the higher dayrates
in Alberta compared to in
Saskatchewan, as the Corporation
added one rig in Alberta during
2019.
- Operating days in the drilling rig division of 289 days in the
fourth quarter of 2019 was a 1% decrease over the 292 operating
days in the fourth quarter of 2018 due to weather related delays in
western Canada. The drilling rig
utilization for the quarter ended December
31, 2019 was 31%, 35% above the CAODC industry average
utilization rate of 23%.
- Direct operating expenses are primarily comprised of personnel,
equipment, operating and repair costs, and shop expenses. For the
fourth quarter ended December 31,
2019, gross margin as a percentage of revenue was 32%, down
22% from a gross margin of 41% in the fourth quarter of 2018. The
decrease in gross margin as a percentage of revenue was primarily a
result of increased startup costs for rigs that had not worked in
2019 that went to work in Q1 2020.
- General and administrative expenses for the three months ended
December 31, 2019 were $1,093, up $24 (2%)
from $1,069 for the three months
ended December 31, 2018, as a result
of the increased headcount and the higher allocation of corporate
expenses related to salaries, IT and professional fees as part of
the Corporation's continuing operations.
- For the fourth quarter ended December
31, 2019, the Adjusted EBITDA was $1,139, a $284
(20%) decrease from Adjusted EBITDA of $1,423 in the comparable quarter of 2018, mainly
as a result of the increase in direct operating expenses from
higher wages which was partially offset by the increased revenue
generated by higher dayrates.
RESULTS OF DISCONTINUED OPERATIONS
On April 3, 2019, the Corporation
announced the discontinuation of its directional drilling division.
As part of this process, the Corporation presented the results of
the directional drilling operations using the guidance under "IFRS
5 - Non-Current Assets Held for Sale and Discontinued Operations",
as discontinued operations on the consolidated statements of
comprehensive income (loss) and the consolidated statements of cash
flows for the current and comparative periods.
During the second quarter, the Corporation disposed of its
directional drilling assets to an independent, third-party
purchaser. In accordance with the disposal, property and equipment
with a net book value of $912 was
sold on May 27, 2019 for gross
proceeds of $1,500 which resulted in
recognition of a gain on disposition of $588, which was classified within discontinued
operations.
The general and administrative expenses for the three
months ended December 31, 2019
represent the remaining costs associated with discontinued
operations. As part of the disposal transaction, right of use
assets previously used by the directional drilling division and
their related lease liabilities were assigned to the purchaser with
the purchaser assuming all rights and obligations under the
lease.
The following table sets forth operating results from the
discontinued operations for the three months and year ended
December 31, 2019 and 2018:
|
Three months ended
December 31,
|
(000's CAD $
except operating days)
|
2019
|
2018
|
%
Change
|
|
|
|
|
Directional drilling
revenue
|
-
|
541
|
(100%)
|
Direct operating
expenses
|
-
|
524
|
(100%)
|
Gross margin
(1)
|
-
|
17
|
(100%)
|
Gross margin %
(1)
|
-
|
3%
|
nm
|
Directional drilling
net income (loss)
|
34
|
(2,515)
|
(101%)
|
General and
administrative expenses
|
11
|
2,320
|
(100%)
|
Adjusted EBITDA
(1)
|
(83)
|
(340)
|
(76%)
|
Directional drilling
operating days(2)
|
-
|
184
|
(100%)
|
Directional drilling
revenue per day
|
nm
|
2.9
|
nm
|
nm - not
meaningful.
|
|
|
|
(1) Refer to "Non-GAAP measures" for
further information.
|
|
|
|
(2) A
stand-by day is calculated as 0.5 day of an operating
day.
|
|
|
|
|
|
Years ended
December 31,
|
(000's CAD $
except operating days)
|
2019
|
2018
|
%
Change
|
|
|
|
|
Directional drilling
revenue
|
1,837
|
4,845
|
(62%)
|
Direct operating
expenses
|
1,020
|
4,062
|
(75%)
|
Gross margin
(1)
|
817
|
783
|
4%
|
Gross margin %
(1)
|
44%
|
16%
|
175%
|
Directional drilling
net income (loss)
|
1,002
|
(4,036)
|
(125%)
|
General and
administrative expenses
|
411
|
4,192
|
(90%)
|
Adjusted EBITDA
(1)
|
463
|
(1,284)
|
136%
|
Directional drilling
operating days(2)
|
209
|
512
|
(59%)
|
Directional drilling
revenue per day
|
8.8
|
9.5
|
(7%)
|
(1) Refer to "Non-GAAP measures" for
further information.
|
|
|
|
(2) A
stand-by day is calculated as 0.5 day of an operating
day.
|
|
|
|
- Revenue from discontinued operations for the year ended
December 31, 2019 was $1,837, a decrease of $3,008 (62%) from $4,845 in the prior year comparable period, as a
result of a 59% decrease in operating days due to the suspension of
operations on April 3, 2019.
- Direct operating expenses from discontinued operations for the
year ended December 31, 2019 were
$1,020, a decrease of $3,042 (75%) from $4,062 in the prior year comparable period. Gross
margin as a percentage of revenue for the year ended December 31, 2019 was 44%, up 175% from 16% for
the year ended December 31, 2018. The
primary reason for the increase was the rebilling of repairs and
maintenance costs of $285 to
customers and the deferral of all non-essential repairs to the
Corporation's owned equipment.
- General and administrative expenses from discontinued
operations for the year ended December 31,
2019 was $411, a decrease of
$3,781 (90%) compared to $4,192 in the corresponding 2018 period. The
overall decrease was a result of a reduction in headcount in the
division and the reallocation of expenses of salaries, legal, IT,
and rent from the directional drilling division to the drilling rig
division.
- The overall effect of the decrease in revenue combined with the
decrease in direct operating costs and general and administrative
expenses resulted in Adjusted EBITDA of $463 for 2019, an increase of $1,747 (136%) from an Adjusted EBITDA loss of
$1,284 as compared to the
corresponding 2018 period.
- Net income (loss) from discontinued operations for the year
ended December 31, 2019 was
$1,002, an increase of $5,038 (125%) from a net loss from discontinued
operations of $4,036 as compared to
the corresponding 2018 period due to the gain on disposition from
sale of the directional drilling assets.
NON-GAAP MEASURES
This MD&A contains references to (i) Adjusted EBITDA and
(ii) Gross margin. These financial measures are not measures that
have any standardized meaning prescribed by IFRS and are therefore
referred to as non-GAAP (Generally Accepted Accounting Principles)
measures. The non-GAAP measures used by the Corporation may not be
comparable to similar measures used by other companies.
(i) Adjusted EBITDA is defined as "income (loss) from
operations before interest income, interest expense, taxes,
transaction costs, depreciation and amortization, share-based
compensation expense, gains on disposal of property and equipment,
impairment expenses, other income, foreign exchange, non-recurring
restructuring charges, finance costs, accretion of debentures and
other income/expenses, and any other items that the Corporation
considers appropriate to adjust given the irregular nature and
relevance to comparable operations." Management believes that in
addition to net and total comprehensive income (loss), Adjusted
EBITDA is a useful supplemental measure as it provides an
indication of the results generated by the Corporation's principal
business activities prior to consideration of how these activities
are financed, how assets are depreciated, amortized and impaired,
the impact of foreign exchange, or how the results are affected by
the accounting standards associated with the Corporation's
stock-based compensation plan. Investors should be cautioned,
however, that Adjusted EBITDA should not be construed as an
alternative to net income (loss) and comprehensive income (loss)
determined in accordance with IFRS as an indicator of the
Corporation's performance. The Corporation's method of calculating
Adjusted EBITDA may differ from that of other organizations and,
accordingly, its Adjusted EBITDA may not be comparable to that of
other companies.
|
Three months
ended
December 31,
|
|
Years ended
December 31,
|
(000's CAD
$)
|
2019
|
2018
|
%
Change
|
|
2019
|
2018
|
%
Change
|
Net (loss) income
from continuing operations
|
(104)
|
520
|
(120%)
|
|
(1,247)
|
(88)
|
1,317%
|
Depreciation
(1)
|
1,055
|
916
|
15%
|
|
4,274
|
2,464
|
73%
|
Deferred tax
recovery
|
-
|
(296)
|
(100%)
|
|
-
|
(296)
|
(100%)
|
Finance
costs
|
184
|
113
|
63%
|
|
684
|
406
|
68%
|
Other
income
|
(19)
|
(18)
|
nm
|
|
(123)
|
(18)
|
583%
|
Gain from disposition
of property and equipment
|
(8)
|
-
|
100%
|
|
(8)
|
(172)
|
(95%)
|
Share-based
payments
|
50
|
38
|
nm
|
|
428
|
76
|
463%
|
Transaction
costs
|
10
|
144
|
(93%)
|
|
156
|
683
|
(77%)
|
Foreign exchange
loss
|
(25)
|
6
|
nm
|
|
(19)
|
5
|
(480%)
|
Adjusted
EBITDA
|
1,139
|
1,423
|
(20%)
|
|
4,126
|
3,060
|
35%
|
nm - not
meaningful
|
|
|
|
|
|
|
|
(1) Includes depreciation of property
and equipment and right-of-use assets.
|
|
|
|
|
(ii) Gross margin is defined as "gross profit from
services revenue from continuing operations before stock-based
compensation and depreciation". Gross margin is a measure that
provides shareholders and potential investors additional
information regarding the Corporation's cash generating and
operating performance. Management utilizes this measure to assess
the Corporation's operating performance. Investors should be
cautioned, however, that gross margin should not be construed as an
alternative to net income (loss) and comprehensive income (loss)
determined in accordance with IFRS as an indicator of the
Corporation's performance. The Corporation's method of calculating
gross margin may differ from that of other organizations and,
accordingly, its gross margin may not be comparable to that of
other companies.
|
Three months
ended
December 31,
|
|
Years ended
December 31,
|
(000's CAD
$)
|
2019
|
2018
|
%
Change
|
|
2019
|
2018
|
%
Change
|
Income from
operations
|
1,127
|
1,538
|
(27%)
|
|
4,206
|
3,183
|
32%
|
Depreciation of
property and equipment
|
989
|
916
|
8%
|
|
3,991
|
2,464
|
62%
|
Gross
margin
|
2,116
|
2,454
|
(14%)
|
|
8,197
|
5,647
|
45%
|
Gross margin
%
|
32%
|
41%
|
(22%)
|
|
35%
|
35%
|
0%
|
FORWARD-LOOKING INFORMATION
Certain statements contained in this News Release constitute
forward-looking statements or forward-looking information
(collectively, "forward-looking information"). Forward-looking
information relates to future events or the Corporation's future
performance. All information other than statements of historical
fact is forward-looking information. The use of any of the words
"anticipate", "plan", "contemplate", "continue", "estimate",
"expect", "intend", "propose", "might", "may", "will", "could",
"believe", "predict", and "forecast" are intended to identify
forward-looking information.
This News Release contains forward-looking information
pertaining to, among other things: the Corporation's expectations
regarding the impact on macro-economic factors of the COVID-19
virus, of instability created by OPEC's inability to maintain the
global oil supply and the resulting impact of both on commodity
prices; the Corporation's expectation that Canadian oil and
gas producers will continue to be faced with the challenge of
exporting their products due to uncertainty surrounding the timing
of the Trans Mountain pipeline expansion project; the Corporation's
capital expenditure budget for 2020 and expected responses to
COVID-19 and commodity pricing; the belief that Adjusted
EBITDA is a useful supplemental financial measure; the expectation
of having full access to its Operating Loan facility to fund 2020
operations and other strategic opportunities; and the expected
effects of seasonality and weather on the Corporation's operations
and business, amongst others.
Statements, including forward-looking information, are made as
of the date of this News Release and the Corporation does not
undertake any obligation to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws. The forward-looking information contained in this News
Release is expressly qualified by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Stampede Drilling Inc.