Home Partner News Media Releases Mainstream News Opportunities Multimedia Events Press Release Mar 21, 2024 AKITA Drilling Ltd. (“AKITA” or the “Company”) announces net earnings of $18,415,000 for the year ended December 31, 2023, compared to $4,288,000 in 2022, an increase of 329% year over year and a return to a positive retained earnings balance. Significantly improved earnings translated into a 31% increase in adjusted funds flow from operations, which increased to $45,522,000 in 2023, from $34,813,000 in 2022. Both net income and adjusted funds flow from operations were the highest achieved since 2014. Despite improved financial results, activity was down year over year with the Canadian division achieving 2,239 operating days in 2023, compared to 2,518 operating days in 2022 and the US division achieving 3,853 operating days in 2023, compared to 4,088 operating days in 2022. In the US, 2023 started at full capacity but began to decline over the second half of the year while Canada fell behind 2022 in the second quarter and remained behind for the balance of the year. Improved operating margins per day, driven by improved day rates, were the key driver for the Company’s improved year over year results. Operating margin per operating day increased 30% in Canada and 31% in the US. Capital spending for the year was $24,592,000 in 2023 compared to $17,982,000 in 2022, and included the cost of upgrading one Canadian oil sands configured rig to position it for deep gas drilling. The Company’s debt balance decreased by $24,000,000 in 2023, exceeding the Company’s $20,000,000 debt repayment target, and now sits at $69,542,000 total debt compared to $93,514,000 total debt a year prior. Colin Dease, AKITA’s Chief Executive Officer stated: “2023 was a successful year, surpassing our debt repayment target, returning to positive retained earnings, improving our year over year safety results and taking our first step to reconfigure our fleet of oil sands rigs so they are well equipped for both SAGD drilling as well as deep gas drilling in order to increase our exposure to one of Canada’s strongest market segments. I would like to thank everyone at AKITA and our First Nation, Métis and Inuvialuit partners for making 2023 a strong year and for their continued commitment to this company” CONSOLIDATED FINANCIAL HIGHLIGHTS
($Thousands except per
For the three months ended December 31,
For the year ended December 31,
2023
2022
Change
% Change
2023
2022
Change
% Change
Revenue
47,317
59,525
(12,208)
(21 %)
225,479
200,996
24,483
12 %
Operating and
38,228
40,666
(2,438)
(6 %)
167,029
151,884
15,145
10 %
Operating margin
9,089
18,859
(9,770)
(52 %)
58,450
49,112
9,338
19 %
Margin %
19 %
32 %
(13 %)
(41 %)
26 %
24 %
2 %
8 %
Net cash from operating
17,523
8,035
9,488
118 %
35,567
18,198
17,369
95 %
Adjusted funds flow from
7,177
16,144
(8,967)
(56 %)
45,522
34,813
10,709
31 %
Per share
0.18
0.41
(0.23)
(56 %)
1.15
0.88
0.27
31 %
Net income (loss)
(1,166)
8,813
(9,979)
(113 %)
18,415
4,288
14,127
329 %
Per share
(0.03)
0.22
(0.25)
(114 %)
0.46
0.11
0.35
318 %
Capital expenditures
12,822
4,917
7,905
161 %
24,592
17,982
6,610
37 %
Weighted average shares
39,684
39,650
34
0 %
39,659
39,623
36
0 %
Total assets
263,640
268,281
(4,641)
(2 %)
Total debt
69,542
93,514
(23,972)
(26 %)
United States Operations
$Thousands except per day amounts
For the three months ended December 31,
For the year ended December 31,
2023
2022
Change
% Change
2023
2022
Change
% Change
Revenue US
35,549
44,839
(9,290)
(21 %)
169,474
145,717
23,757
16 %
Flow through charges
(4,183)
(5,383)
1,200
22 %
(17,610)
(14,919)
(2,691)
(18 %)
Adjusted revenue US
31,366
39,456
(8,090)
(21 %)
151,864
130,798
21,066
16 %
Operating and maintenance
29,293
29,861
(568)
(2 %)
125,473
110,086
15,387
14 %
Flow through charges
(4,183)
(5,383)
1,200
22 %
(17,610)
(14,919)
(2,691)
(18 %)
Adjusted operating and
25,110
24,478
632
3 %
107,863
95,167
12,696
13 %
Adjusted operating margin
6,256
14,978
(8,722)
(58 %)
44,001
35,631
8,370
23 %
Margin %
20 %
38 %
(18 %)
(47 %)
29 %
27 %
2 %
7 %
Operating days
812
1,046
(234)
(22 %)
3,853
4,088
(235)
(6 %)
Adjusted revenue per operating
38,628
37,721
907
2 %
39,414
31,996
7,418
23 %
Adjusted operating and
30,924
23,402
7,522
32 %
27,995
23,280
4,715
20 %
Adjusted operating margin per
7,704
14,319
(6,615)
(46 %)
11,419
8,716
2,703
31 %
Utilization
59 %
71 %
(12 %)
(17 %)
70 %
70 %
0 %
0 %
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 Company’s US division began the year operating at full capacity with all 14 marketed rigs active until August when the declining rig count in the industry began to affect the Company, dropping AKITA’s US rig count to ten active rigs in September before hitting a low of eight active rigs in October of 2023, and ending the year with nine active rigs. Adjusted operating margin increased 23% to $44,001,000 in 2023, from $35,631,000 in 2022 despite a 6% decrease in year over year operating days. Higher revenue per operating day was the cause of the increased adjusted operating margin. Revenue per day increased 23% to $39,414 in 2023, from $31,996 in 2022, peaking at $40,499 in the second quarter of 2023 and ending the year at $38,628, 2% above the same period of 2022. Pressure on day rates as the active industry rig count fell was the cause of the decrease in rates. Revenue in the US accounted for 64% of the Company’s total 2023 adjusted revenue, consistent with 63% in 2022. Adjusted operating margin in the US was 65% of the total for the Company in 2023, up from 64% in 2022. Adjusted operating and maintenance costs increased to $107,863,000 in 2023 from $95,167,000 in 2022, due to higher per day costs, which increased to $27,995 in 2023 from $23,280 in 2022 and peaked in the fourth quarter of 2023 at $30,924. The cause of the increased adjusted operating and maintenance costs is an overall increase in all costs associated with operating a drilling rig. This includes the provision of more ancillary items, such as rental drill pipe at the Company’s expense, as competition increased in response to the reduced active industry rig count. Adjusted operating and maintenance costs were positively impacted by the receipt of a $4.0 million Employee Retention Credit (“ERC”) from the IRS. The ERC is a COVID-19 related credit, granted to employers that retained a certain number of employees while experiencing significant decreases in revenue during the pandemic. This amount reduced the total operating costs in the year (2022 – $2.0 million). Canadian Operations
$Thousands except per day amounts
For the three months ended December 31,
For the year ended December 31,
2023
2022
Change
% Change
2023
2022
Change
% Change
Revenue Canada
11,768
14,686
(2,918)
(20 %)
56,005
55,279
726
1 %
Revenue from joint venture drilling rigs
7,672
6,546
1,126
17 %
35,662
25,958
9,704
37 %
Flow through charges
(860)
(712)
(148)
(21 %)
(5,986)
(3,800)
(2,186)
(58 %)
Adjusted revenue Canada
18,580
20,520
(1,940)
(9 %)
85,681
77,437
8,244
11 %
Operating and maintenance
8,935
10,806
(1,871)
(17 %)
41,556
41,799
(243)
(1 %)
Operating and maintenance expenses
6,129
4,470
1,659
37 %
27,144
19,635
7,509
38 %
Flow through charges
(860)
(712)
(148)
(21 %)
(5,986)
(3,800)
(2,186)
(58 %)
Adjusted operating and
14,204
14,564
(360)
(2 %)
62,714
57,634
5,080
9 %
Adjusted operating margin
4,376
5,956
(1,580)
(27 %)
22,967
19,803
3,164
16 %
Margin %
24 %
29 %
(5 %)
(17 %)
27 %
26 %
1 %
4 %
Operating days
465
583
(118)
(20 %)
2,239
2,518
(279)
(11 %)
Adjusted revenue per operating day
39,957
35,197
4,760
14 %
38,268
30,753
7,515
24 %
Adjusted operating and maintenance
30,546
24,981
5,565
22 %
28,010
22,889
5,121
22 %
Adjusted operating margin per operating
9,411
10,216
(805)
(8 %)
10,258
7,864
2,394
30 %
Utilization
25 %
32 %
(7 %)
(22 %)
31 %
34 %
(3 %)
(9 %)
Rig count
20
20
–
0 %
20
20
–
0 %
Results in Canada improved in 2023, with adjusted operating margin increasing 16% to $22,967,000 in the year from $19,803,000 in 2022. This increase was driven by improved day rates throughout the fleet which increased 24% in 2023 when compared to 2022. The impact of improved day rates was partially offset somewhat by reduced activity in 2023 compared to 2022. Operating days fell by 11% in the year due to prolonged forest fires and conservation activities, which reduced second quarter activity and led to fewer operating days for AKITA’s double rigs. During 2023, AKITA achieved 2,239 operating days in Canada, which corresponds to an annual utilization rate of 31%, compared to a 2023 industry average of 36% and a 2022 utilization rate for the Company of 34% (2,518 days). Adjusted operating and maintenance expenses increased 9% to $62,714,000 in 2023 from $57,634,000 in 2022. The increase was not in-line with the 11% decrease in operating days but was reflective of increased per day costs. On a per day basis, adjusted operating and maintenance costs increased to $28,010 in 2023 from $22,889 in 2022. Higher labour costs, which make up 68% of the total operating and maintenance expense in 2023, were the main cause of the increase. Also contributing to higher operating and maintenance costs in 2023 were higher maintenance costs in the year overall due to startup costs on two rigs. 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, 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 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 expenses 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.
For the three months ended
For the year ended
$Thousands
2023
2022
2023
2022
Net cash from operating activities
17,523
8,035
35,567
18,198
Interest paid
1,243
2,142
6,292
6,622
Interest expense
(1,294)
(2,181)
(6,502)
(6,777)
Post-employment benefits paid
79
378
322
584
Equity income from joint ventures
1,488
2,001
8,184
5,954
Change in non-cash working capital
(11,862)
5,769
1,659
10,232
Adjusted funds flow from operations
7,177
16,144
45,522
34,813
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. IBF4
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