CALGARY,
July 28, 2015 /CNW/ - AKITA
Drilling Ltd.'s net loss for the three months ended June 30, 2015 was $1,620,000 (net loss of $0.09 per share) on revenue of $22,536,000, compared to net income of
$2,082,000 (net income of
$0.12 per share) on revenue of
$28,365,000 for the corresponding
period in 2014. The second quarter results for 2015 included
a one-time deferred income tax charge of $1,191,000 ($0.07
per share) as a result of a future provincial corporate income tax
rate increase in Alberta in
addition to a net loss of $429,000 as
a result of routine operations. Funds flow from operations
for the quarter ended June 30, 2015
was $9,072,000 compared to
$10,609,000 in the corresponding
quarter in 2014.
Net income for the six months ended June 30, 2015 was $2,598,000 ($0.14
per share) on revenue of $69,251,000
and included the one-time deferred tax charge of $1,191,000 noted above. Comparative figures
for the corresponding six month period in 2014 were net income of
$12,231,000 ($0.68 per share) and revenue of $82,708,000. Funds flow from operations for
the January to June period in 2015 was $23,131,000 compared to $28,273,000 for the comparative period in
2014.
Continuing weak commodity prices for crude oil
and natural gas had a significant negative effect on AKITA's
activity levels both during the second quarter of 2015 and on a
year-to-date basis. AKITA achieved 885 operating days during
the second quarter of 2015 (2,520 operating days on a year-to-date
basis) compared to 1,220 days during the second quarter of 2014
(3,333 operating days for January to June, 2014). This
reduction in operating days was most pronounced for conventional
rigs, which accounted for 88% of the overall decline.
Weakened demand for drilling rigs had a negative
effect on drilling rig rates, which affected the financial results
for each of AKITA's rig categories. From an earnings
perspective, however, the effect of weakened rates was mitigated to
an extent by a change in rig classes worked. This change in
rig classes resulted in a higher proportion of AKITA's pad rigs
working. Pad rigs achieve higher revenue rates than
conventional rigs.
During the second quarter of 2015, the Company
deployed its newly completed pad triple rig for work in the
Alberta foothills.
The Company anticipates that most of its
remaining 2015 capital expenditures will be directed towards
routine items.
As a result of the uncertainty around the timing
and extent of any recovery in the industry, the Company remains
focused on maintaining the strength of its already high quality
balance sheet. At June 30,
2015, borrowings by the Company had declined to $2,500,000 from $20,000,000 at December
31, 2014. In addition, the Company had a cash balance
of $4,725,000 at June 30, 2015, generating a positive "net cash"
position.
Weak market conditions are likely to persist for
the balance of 2015 and potentially beyond. Nevertheless, the
Company is well positioned financially, and has a significant asset
base that includes a broad range of drilling equipment, including
21 pad rigs that are focused on some of the most active regions of
the current market. AKITA has a significant base of
well-trained personnel to meet our customers' requirements, both in
the existing market and when drilling conditions improve.
Selected information from AKITA Drilling Ltd.'s
Management's Discussion and Analysis from the Quarterly Report is
as follows:
Basis of Analysis in this MD&A ,
Non-Standard and Additional GAAP Items
The Company reports its joint venture activities
in the financial statements in accordance with International
Financial Reporting Standards ("IFRS"), IFRS 11 "Joint
Arrangements". In determining the classification of its joint
arrangements, AKITA considers whether the joint arrangements are
structured through separate vehicles, if the legal form of the
separate vehicles confers upon the parties direct rights to assets
and obligations for liabilities relating to the arrangements,
whether the contractual terms between the parties confer upon them
rights to assets and obligations for liabilities relating to the
arrangements as well as if other facts and circumstances lead to
rights to assets and obligations for liabilities being conferred
upon the parties to the arrangement prior to concluding that
AKITA's joint ventures are appropriately classified as joint
ventures rather than joint operations. Under IFRS 11, AKITA
is required to report its joint venture assets, liabilities and
financial activities using the equity method of accounting.
However, for purposes of analysis in this MD&A, the
proportionate share of assets, liabilities and financial activities
is included as non-standard Generally Accepted Accounting
Principles ("GAAP") information ("Adjusted") where
appropriate. The Company provides the same drilling services
and utilizes the same management, financial and reporting controls
for its joint venture activities as are in place for its wholly
owned operations. None of AKITA's joint ventures are
individually material in size when considered in the context of
AKITA's overall operations.
Operating margin, revenue per operating day,
operating and maintenance expense per operating day and operating
margin per operating day are not recognized measures under
IFRS. Management finds and certain investors may find
operating margin data to be a useful measurement tool as it
provides an indication of the profitability of the business prior
to the influence of depreciation, overhead expenses, financing
costs and income taxes. Management finds and certain
investors may find "per operating day" measures for revenue and
operating margin indicate pricing strength while operating and
maintenance expense per operating day demonstrates a degree of cost
control and provides a proxy for specific inflation rates incurred
by the Company. Readers should be cautioned that in addition
to the foregoing, other factors, including the mix of rigs between
conventional and pad and singles, doubles and triples can also
influence these results. Readers should also be aware that
AKITA includes standby revenue in its determination of "per
operating day" results.
Funds flow from operations is considered as an
additional GAAP measure under IFRS. AKITA's method of
determining funds flow from operations may differ from methods used
by other companies and includes cash flow from operating activities
before working capital changes as well as equity income from joint
ventures adjusted for income tax amounts paid during the
period. Management finds and certain investors may find funds
flow from operations to be a useful measurement tool 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.
Revenue and Operating & Maintenance
Expenses
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Revenue per Interim
Financial Statements
|
22.5
|
28.4
|
(5.9)
|
(21%)
|
|
69.3
|
82.7
|
(13.4)
|
(16%)
|
Proportionate Share
of Revenue from Joint Ventures(1)
|
7.7
|
16.6
|
(8.9)
|
(54%)
|
|
20.5
|
34.1
|
(13.6)
|
(40%)
|
Adjusted
Revenue(1)
|
30.2
|
45.0
|
(14.8)
|
(33%)
|
|
89.8
|
116.8
|
(27.0)
|
(23%)
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Operating &
Maintenance Expenses per Interim Financial Statements
|
13.9
|
18.7
|
(4.8)
|
(26%)
|
|
45.1
|
53.5
|
(8.4)
|
(16%)
|
Proportionate Share
of Operating & Maintenance Expenses from Joint
Ventures(1)
|
4.9
|
10.5
|
(5.6)
|
(53%)
|
|
13.1
|
21.3
|
(8.2)
|
(38%)
|
Adjusted Operating
& Maintenance Expenses(1)
|
18.8
|
29.2
|
(10.4)
|
(36%)
|
|
58.2
|
74.8
|
(16.6)
|
(22%)
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Adjusted
Revenue(1)
|
30.2
|
45.0
|
(14.8)
|
(33%)
|
|
89.8
|
116.8
|
(27.0)
|
(23%)
|
Adjusted Operating
& Maintenance Expenses(1)
|
18.8
|
29.2
|
(10.4)
|
(36%)
|
|
58.2
|
74.8
|
(16.6)
|
(22%)
|
Adjusted Operating
Margin(1)(2)(3)
|
11.4
|
15.8
|
(4.4)
|
(28%)
|
|
31.6
|
42.0
|
(10.4)
|
(25%)
|
|
|
|
|
$
Dollars
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Adjusted Revenue per
Operating Day(1)
|
34,130
|
36,843
|
(2,713)
|
(7%)
|
|
35,598
|
35,059
|
539
|
2%
|
Adjusted Operating
& Maintenance Expenses per Operating
Day(1)
|
21,175
|
23,933
|
(2,758)
|
(12%)
|
|
23,115
|
22,466
|
649
|
3%
|
Adjusted Operating
Margin per Operating Day(1)(2)
|
12,955
|
12,910
|
45
|
0%
|
|
12,483
|
12,593
|
(110)
|
(1%)
|
|
|
|
|
(1)
|
Proportionate
share of revenue from joint ventures, adjusted revenue,
proportionate share of operating & maintenance expenses from
joint ventures, adjusted operating & maintenance expenses,
adjusted operating margin, adjusted revenue per operating day,
adjusted operating & maintenance expenses per operating day and
adjusted operating margin per operating day are non-standard
accounting measures. See commentary in "Basis of Analysis in
this MD&A, Non-Standard and Additional GAAP
Items".
|
|
(2)
|
Adjusted operating
margin is the difference between adjusted revenue and adjusted
operating & maintenance expenses.
|
|
(3)
|
Balances may
differ from financial statements as a result of
rounding.
|
Second Quarter Comparatives
During the second quarter of 2015, adjusted
revenue decreased to $30,205,000
compared to $44,948,000 during the
second quarter of 2014 as a result of weak market conditions,
particularly for conventional rigs, but also to a lesser extent for
pad rigs. Continuing low commodity prices for crude oil and
natural gas were primary reasons for this market weakness.
In addition to a decline in overall adjusted
revenue for the three month period ended June 30, 2015, adjusted revenue per operating day
decreased to $34,130 during the
second quarter of 2015 from $36,843
in the comparative quarter of 2014 due to lower day rates for most
of AKITA's rigs, which was partially offset by having a higher
percentage of pad rigs working. Pad rigs, compared to
conventional drilling rigs, typically generate higher revenue on a
per day basis.
Adjusted operating and maintenance costs are tied
to revenue and amounted to $18,740,000 ($21,175 per operating day) during the second
quarter of 2015 compared to $29,198,000 ($23,933 per operating day) in the same period of
the prior year. The decreases in operating and maintenance
costs, both on a total and "per day" basis, resulted primarily from
reduced drilling activity and secondarily from cost reductions.
The adjusted operating margin for the Company
decreased to $11,465,000 in the
second quarter of 2015 from $15,750,000 during the corresponding quarter of
2014. Lower activity due to weaker market conditions was the
primary reason for the decline in operating margin. Although
the overall operating margin decreased during the second quarter of
2015 as compared to the corresponding period in 2014, AKITA's
adjusted operating margin per operating day increased slightly to
$12,955 from $12,910 in the comparative period during 2014, as
a result of a change in rig mix which included a higher proportion
of pad rigs working.
Year-to-Date Comparatives
During the first six months of 2015, adjusted
revenue decreased to $89,707,000 from
$116,815,000 during the first six
months of 2014 as a result of lower drilling activity. 88% of
this decline in activity is attributable to AKITA's conventional
rigs.
Although adjusted revenue for the year-to-date
period ended June 30, 2015 decreased,
adjusted revenue per operating day increased to $35,598 during the first six months of 2015 from
$35,059 in the comparative six month
period of 2014 due to the same factors that affected second quarter
adjusted revenue per operating day.
Adjusted operating and maintenance costs are tied
to revenue and amounted to $58,249,000 ($23,115 per operating day) during the first six
months of 2015 compared to $74,858,000 ($22,466 per operating day) in the same period of
the prior year.
The adjusted operating margin for the Company
decreased to $31,458,000 in the first
six months of 2015 from $41,957,000
during the corresponding period of 2014. The reduction in
operating margin was related to weaker market conditions. The
higher percentage of pad drilling that occurred in the first six
months of 2015 compared to the first six months of 2014 helped
offset the "per operating day" decline in operating margin.
Other Comments
From time to time, the Company requires customers
to make pre-payments prior to the provision of drilling
services. In addition, from time to time, the Company records
cost recoveries related to capital enhancements for specific
customer related projects. At June 30,
2015, deferred revenue related to these activities totalled
$79,000 (June
30, 2014 - $76,000).
Depreciation and Amortization
Expense
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Depreciation and
Amortization Expense
|
8.3
|
7.3
|
1.0
|
14%
|
|
17.3
|
15.1
|
2.2
|
15%
|
The depreciation and amortization expense
reported in the second quarter of 2015 of $8,276,000 was higher than the corresponding
quarter of 2014 ($7,256,000).
AKITA depreciates its rig fleet on a unit of production basis and
while overall drilling days declined during the second quarter of
2015 compared to the corresponding quarter in 2014, the most active
rigs in the second quarter of 2015 were also the rigs with the
highest cost bases.
Depreciation and amortization expense for the
first six months of 2015 totalled $17,344,000 compared to $15,119,000 for the corresponding period in
2014. As with the depreciation and amortization expense for
the second quarter, the higher cost base for AKITA's active rigs
more than offset the lower rig activity levels. In the first
six months of 2015, drilling rig depreciation accounted for 96% of
total depreciation and amortization expense (2014 - 96%).
While AKITA conducts several of its drilling
operations via joint ventures, the drilling rigs used to conduct
those activities are owned jointly by AKITA and its joint venture
partners, and not the joint ventures themselves. Therefore,
the joint ventures do not hold any property, plant, or equipment
assets directly. Consequently, the depreciation balance
reported above includes depreciation on assets involved in both
wholly owned and joint ventured activities.
Selling and Administrative
Expense
|
|
|
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Selling &
Administrative Expense per Interim Financial Statements
|
3.7
|
4.8
|
(1.1)
|
(23%)
|
|
8.4
|
10.0
|
(1.6)
|
(16%)
|
Proportionate Share
of Selling & Administrative Expense from Joint
Ventures(1)
|
0.1
|
0.3
|
(0.2)
|
(67%)
|
|
0.3
|
0.5
|
(0.2)
|
(40%)
|
Adjusted Selling
& Administrative Expense(1)
|
3.8
|
5.1
|
(1.3)
|
(25%)
|
|
8.7
|
10.5
|
(1.8)
|
(17%)
|
(1)
|
Proportionate
share of selling and administrative expense from joint ventures and
adjusted selling and administrative expense are non-standard
accounting measures. See commentary in "Basis of Analysis in
this MD&A, Non-Standard and Additional GAAP
Items".
|
Adjusted selling and administrative expenses were
9.6% of adjusted revenue in the first six months of 2015 compared
to 9.0% of adjusted revenue in the first six months of 2014 as a
result of achieving lower adjusted revenue in 2015. The
Company has been able to reduce overall selling and administrative
costs, particularly in the second quarter as a result of
implementing various management controls. The single largest
component of selling and administrative expenses was salaries and
benefits, which accounted for 58% of these expenses (58% in
2014).
Equity Income from Joint
Ventures
|
|
|
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Proportionate Share
of Revenue from Joint Ventures(1)
|
7.7
|
16.6
|
(8.9)
|
(54%)
|
|
20.5
|
34.1
|
(13.6)
|
(40%)
|
Proportionate Share
of Operating & Maintenance Expenses from Joint
Ventures(1)
|
4.9
|
10.5
|
(5.6)
|
(53%)
|
|
13.1
|
21.3
|
(8.2)
|
(38%)
|
Proportionate Share
of Selling & Administrative Expense from Joint
Ventures(1)
|
0.1
|
0.3
|
(0.2)
|
(67%)
|
|
0.3
|
0.5
|
(0.2)
|
(40%)
|
Equity Income from
Joint Ventures per Interim Financial Statements
|
2.7
|
5.8
|
(3.1)
|
(53%)
|
|
7.1
|
12.3
|
(5.2)
|
(42%)
|
(1)
|
Proportionate
share of revenue from joint ventures, proportionate share of
operating & maintenance expenses from joint ventures and
proportionate share of selling & administrative expense from
joint ventures are non-standard accounting measures. See
commentary in "Basis of Analysis in this MD&A, Non-Standard and
Additional GAAP Items".
|
The Company provides the same drilling services
and utilizes the same management, financial and reporting controls
for its joint venture activities as are in place for its wholly
owned operations. The analyses of these activities are
incorporated throughout the relevant sections of this
MD&A. Joint venture activities are often located in some
of the most prospective regions in Canada. Two thirds of
AKITA's joint ventures utilize pad drilling rigs.
Other Income
|
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Total Other
Income
|
0.1
|
(0.4)
|
0.5
|
125%
|
|
(0.1)
|
0.0
|
(0.1)
|
N/A
|
Interest income decreased to $68,000 in the first six months of 2015 from
$98,000 in the corresponding period
in 2014 primarily as a result of reduced interest rates. In
addition, between 2011 and 2014, the Company had undertaken
significant capital expenditures related to the construction of new
rigs and the conversion of conventional rigs into pad rigs, thereby
reducing AKITA's cash balances over time.
During the first six months of 2015, the Company
recorded interest expense of $285,000
as a result of the Company's indebtedness as well as to accrue the
related future cost of the Company's unfunded defined benefit
pension plan. During the corresponding six month period in
2014, AKITA recorded interest expense of $77,000 primarily to reflect the related future
cost of the Company's defined benefit pension plan. The
Company reduced its operating loan facility balance during the
second quarter of 2015 from $19,814,000 to $2,500,000 at June 30,
2015.
During the first six months of 2015, the Company
sold some ancillary assets for $786,000 that resulted in a loss of $111,000. During the first six months of
2014, the Company disposed of certain non-core assets resulting in
a $118,000 gain.
Approximately 95% of amounts recorded as "Net
Other Gains" during the first six months of 2015 related to foreign
exchange, that was associated with rig construction for AKITA's new
pad triple which was deployed during the second quarter of
2015. The comparative period in 2014 included $148,000 in exchange losses related to rig
construction partially offset by $56,000 for non-exchange related losses.
Income Tax Expense
|
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Current Tax
Expense
|
(1.0)
|
0.7
|
(1.7)
|
243%
|
|
0.4
|
4.1
|
(3.7)
|
(90%)
|
Deferred Tax
Expense
|
2.1
|
0.2
|
1.9
|
950%
|
|
2.4
|
(0.0)
|
2.4
|
N/A
|
Income Tax
Expense
|
1.1
|
0.9
|
0.2
|
22%
|
|
2.8
|
4.1
|
(1.3)
|
(32%)
|
Income tax expense decreased to $2,777,000 in the first six months of 2015 from
$4,133,000 in the corresponding
period in 2014 mainly due to lower pre-tax earnings. In
addition to the effect of lower pre-tax earnings, during the second
quarter of 2015, the Company recorded a one-time deferred tax
expense of $1,191,000 related to a
corporate income tax increase announced by the Province of
Alberta. Recent capital additions have affected the portion
of income taxes that are deferred to future dates.
Net Income (Loss), Funds Flow and Net Cash From
Operating Activities
|
|
|
|
|
$
Millions
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Net Income
(Loss)
|
(1.6)
|
2.1
|
(3.7)
|
(176%)
|
|
2.6
|
12.2
|
(9.6)
|
(79%)
|
Funds Flow From
Operations(1)
|
9.1
|
10.6
|
(1.5)
|
(14%)
|
|
23.1
|
28.3
|
(5.2)
|
(18%)
|
(1)
|
Funds flow from
operations is an additional GAAP measure under IFRS. See
commentary in "Basis of Analysis in this MD&A, Non-Standard and
Additional GAAP Items".
|
During the three months ended June 30, 2015, the Company reported a net loss of
$1,620,000 or $0.09 per Class A Non-Voting and Class B Common
Share (basic and diluted) compared to net income of $2,082,000 or $0.12
per share (basic and diluted) in the comparative quarter of
2014. The second quarter results for 2015 included a one-time
deferred income tax charge of $1,191,000 as a result of a provincial corporate
income tax rate increase for Alberta in addition to a net loss of
$429,000 as a result of routine
operations. The second quarter of 2015 net loss compared to
the net income reported in the second quarter of 2014 was also
attributable to reductions in drilling activity, reduced day rates,
as well as increased depreciation expense. Funds flow from
operations decreased to $9,072,000
during the second quarter of 2015 from $10,609,000 in the corresponding quarter in
2014. Funds flow from operations was negatively affected by
weaker drilling activity in the second quarter of 2015 but was not
affected by depreciation expense or future income tax expense as
these items are non-cash items.
Net income decreased to $2,598,000 or $0.14
per Class A Non-Voting and Class B Common Share (basic and diluted)
for the first six months of 2015 from $12,231,000 or $0.68 per share (basic and diluted) in the
corresponding period of 2014. Funds flow from operations
decreased to $23,131,000 during the
first six months of 2015 from $28,273,000 in the corresponding period in
2014. Lower net income in 2015 was directly attributable to
reductions in drilling activity coupled with reduced day rates, as
well as higher depreciation expense and a corporate income tax rate
increase in Alberta. Funds flow from operations was
negatively affected by weaker drilling activity and lower day rates
but was not affected by depreciation or income tax rate changes as
these are both non-cash items. As a consequence, while net
income for the first six months of 2015 decreased 79% compared to
the corresponding period in 2014, the decline in funds flow when
comparing the same periods was only 18%.
Fleet and Rig
Utilization
At June 30, 2015
AKITA had 36 drilling rigs, including nine that operated under
joint ventures (32.725 net to AKITA), compared to 37 rigs (33.725
net) in the corresponding period of 2014. During the second
quarter of 2015, the Company completed construction of and
commenced operations with a new pad drilling rig.
|
|
|
|
|
Three Months Ended
June 30
|
|
Six Months Ended
June 30
|
|
2015
|
2014
|
Change
|
%
Change
|
|
2015
|
2014
|
Change
|
%
Change
|
Operating
Days
|
885
|
1,220
|
(335)
|
(27%)
|
|
2,520
|
3,333
|
(813)
|
(24%)
|
Utilization
Rate
|
27.7%
|
36.3%
|
(8.6)
|
(24%)
|
|
39.7%
|
49.1%
|
(9.4)
|
(19%)
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity and Capital Resources
Cash used for capital expenditures totalled
$11,874,000 in the first six months
of 2015 (2014 - $42,973,000).
Nearly three quarters of current year capital expenditures relate
to the completion of a new pad rig that was deployed during the
second quarter. Other capital expenditures related to routine
items.
At June 30, 2015,
AKITA's Statement of Financial Position included working capital
(current assets minus current liabilities) of $7,414,000 compared to working capital of
$14,483,000 at June 30, 2014 and a working capital deficiency of
$5,028,000 at December 31, 2014. Readers should also be
aware of the seasonal nature of AKITA's business and its effect on
non-cash working capital balances. Typically, non-cash
working capital balances reach annual maximum levels at the end of
the first quarter or during the second quarter as a result of
break-up. Non-cash working capital amounted to $2,689,000 at June 30,
2015 compared to a non-cash working capital deficiency of
$7,040,000 at December 31, 2014. During the first six
months of 2015, AKITA undertook a much reduced capital expenditure
program compared to the comparative period in 2014, contributing to
working capital and non-cash working capital during the current
year.
The Company did not have a normal course issuer
bid in place during the first six months of 2015. During the
first six months of 2014, the Company purchased 27,600 Class A
Non-Voting Shares at an average purchase price of $15.49 pursuant to its normal course issuer
bid.
As part of the loan facility agreement, the
Company must adhere to the following financial covenants:
- Funded debt to EBITDA shall not be greater than 3.00 to
1. As at June 30, 2015 (the
most recent measurement date), AKITA's actual rate was 0.05 to
1;
- EBITDA to interest expense shall not be less than 3.00 to
1. As at June 30, 2015, AKITA's
actual rate was 106.44 to 1; and
- Tangible assets to funded debt shall not be less than 2.25 to
1. As at June 30, 2015 AKITA's
actual rate was 116.14 to 1.
Readers should be aware that the terms "funded
debt", "EBITDA", "interest expense" and tangible assets have been
specifically defined in the loan facility agreement and are not
necessarily defined by or consistent with either GAAP or
determinations by other users for other purposes.
The Company had four rigs under multi-year
contracts at June 30, 2015. Of
these contracts, two are anticipated to expire in 2016, one in 2018
and one in 2019.
From time to time, the Company may provide
guarantees for bank loans to joint venture partners in respect of
sales of joint venture interests. At June 30, 2015, AKITA provided $8,482,000 in deposits as security with the bank
for those purposes (June 30, 2014 and
December 31, 2014 - $9,381,000). These deposits have been
recorded as "Restricted Cash" on AKITA's Interim Consolidated
Statements of Financial Position.
Forward-Looking
Statements
From time to time AKITA makes forward-looking
statements. These statements include but are not limited to
comments with respect to AKITA's objectives and strategies,
financial condition, results of operations, the outlook for the
industry and risk management.
By their nature, these forward-looking statements
involve numerous assumptions, inherent risks and uncertainties,
both general and specific, and 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.
Forward-looking statements may be influenced by
factors such as the level of exploration and development activity
carried on by AKITA's customers; world crude oil prices and North
American natural gas prices; weather; access to capital markets and
government policies. We caution that the foregoing list of
factors is not exhaustive and that 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 as required by law, the Company does not
undertake to update any forward-looking statements, whether written
or oral, that may be made from time to time by it or on its
behalf.
Selected financial information for the Company is as
follows:
AKITA Drilling
Ltd.
|
|
|
|
|
Interim
Consolidated Statements of Financial Position
|
|
|
|
|
|
|
Unaudited
|
|
June
30,
|
June 30,
|
December
31,
|
$
Thousands
|
|
2015
|
2014
|
2014
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
|
|
$
4,725
|
$
4,990
|
$
2,012
|
|
Accounts
receivable
|
|
12,885
|
26,510
|
39,981
|
|
Income taxes
recoverable
|
|
2,894
|
-
|
3,011
|
|
Prepaid expenses and
other
|
|
761
|
691
|
257
|
|
|
|
21,265
|
32,191
|
45,261
|
Non-current
Assets
|
|
|
|
|
Restricted
cash
|
|
8,482
|
9,381
|
9,381
|
Other long-term
assets
|
|
971
|
972
|
1,025
|
Investments in joint
ventures
|
|
3,576
|
15,235
|
6,214
|
Property, plant and
equipment
|
|
272,732
|
239,759
|
279,045
|
Total
Assets
|
|
$ 307,026
|
$
297,538
|
$
340,926
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Operating loan
facility
|
|
$
2,500
|
$
-
|
$
20,000
|
|
Accounts payable and
accrued liabilities
|
|
9,747
|
14,752
|
28,589
|
|
Deferred
revenue
|
|
79
|
76
|
175
|
|
Dividends
payable
|
|
1,525
|
1,525
|
1,525
|
|
Income taxes
payable
|
|
-
|
1,355
|
-
|
|
|
|
13,851
|
17,708
|
50,289
|
Non-current
Liabilities
|
|
|
|
|
Financial
instruments
|
|
166
|
76
|
226
|
Deferred income
taxes
|
|
29,468
|
22,729
|
27,053
|
Deferred share
units
|
|
280
|
117
|
91
|
Pension
liability
|
|
3,642
|
2,745
|
3,426
|
Total
Liabilities
|
|
47,407
|
43,375
|
81,085
|
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Class A and Class B
shares
|
|
23,871
|
23,871
|
23,871
|
Contributed
surplus
|
|
3,787
|
3,307
|
3,557
|
Accumulated other
comprehensive income (loss)
|
|
(280)
|
88
|
(280)
|
Retained
earnings
|
|
232,241
|
226,897
|
232,693
|
Total
Equity
|
|
259,619
|
254,163
|
259,841
|
Total Liabilities
and Equity
|
|
$ 307,026
|
$
297,538
|
$
340,926
|
AKITA Drilling
Ltd.
|
|
|
|
|
Interim
Consolidated Statements of Net Income (Loss) and Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
Unaudited
|
|
June
30,
|
June 30,
|
June
30,
|
June 30,
|
$
Thousands
|
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
|
Revenue
|
|
$ 22,536
|
$ 28,365
|
$ 69,251
|
$ 82,708
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
|
Operating and
maintenance
|
|
13,858
|
18,744
|
45,102
|
53,535
|
|
Depreciation and
amortization
|
|
8,276
|
7,256
|
17,344
|
15,119
|
|
Selling and
administrative
|
|
3,726
|
4,830
|
8,437
|
10,055
|
Total costs and
expenses
|
|
25,860
|
30,830
|
70,883
|
78,709
|
|
|
|
|
|
|
Revenue less costs
and expenses
|
|
(3,324)
|
(2,465)
|
(1,632)
|
3,999
|
|
|
|
|
|
|
Equity income from
joint ventures
|
|
2,694
|
5,837
|
7,073
|
12,318
|
|
|
|
|
|
|
Other income
(losses)
|
|
|
|
|
|
|
Interest
income
|
|
37
|
35
|
68
|
98
|
|
Interest
expense
|
|
(79)
|
(43)
|
(285)
|
(77)
|
|
Gain (loss) on sale
of assets
|
|
79
|
117
|
(111)
|
118
|
|
Net other gains
(losses)
|
|
33
|
(542)
|
262
|
(92)
|
Total other income
(losses)
|
|
70
|
(433)
|
(66)
|
47
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
(560)
|
2,939
|
5,375
|
16,364
|
|
|
|
|
|
|
Income
taxes
|
|
1,060
|
857
|
2,777
|
4,133
|
|
|
|
|
|
|
Net income (loss)
and comprehensive income (loss) for the period attributable to
shareholders
|
|
(1,620)
|
2,082
|
2,598
|
12,231
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Class
A and Class B Share
|
|
|
|
|
|
|
Basic
|
|
$ (0.09)
|
$
0.12
|
$
0.14
|
$ 0.68
|
|
Diluted
|
|
$ (0.09)
|
$
0.12
|
$
0.14
|
$ 0.68
|
AKITA Drilling
Ltd.
|
|
|
|
|
|
Interim
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Six Months Ended
|
Unaudited
|
|
June 30,
|
June 30,
|
June 30,
|
June 30,
|
$
Thousands
|
|
2015
|
2014
|
2015
|
2014
|
Operating
Activities
|
|
|
|
|
|
Net income (loss) and
comprehensive income (loss)
|
|
$ (1,620)
|
$
2,082
|
$ 2,598
|
$ 12,231
|
Non-cash items
included in net income (loss):
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
8,276
|
7,256
|
17,344
|
15,119
|
|
Deferred income
taxes
|
|
2,059
|
191
|
2,415
|
(9)
|
|
Expense for defined
benefit pension plan
|
|
114
|
96
|
230
|
194
|
|
Expense for stock
options and deferred share units
|
|
351
|
171
|
420
|
239
|
|
(Gain) loss on sale
of assets
|
|
(79)
|
(117)
|
111
|
(118)
|
|
Unrealized foreign
currency loss
|
|
-
|
945
|
73
|
647
|
|
Unrealized gain on
financial guarantee contracts
|
|
(29)
|
(15)
|
(60)
|
(30)
|
Funds flow from
operations
|
|
9,072
|
10,609
|
23,131
|
28,273
|
Change in non-cash
working capital:
|
|
|
|
|
|
|
Accounts
receivable
|
|
25,719
|
22,490
|
27,096
|
15,832
|
|
Prepaid expenses and
other
|
|
295
|
550
|
(504)
|
(326)
|
|
Income taxes
recoverable
|
|
(1,094)
|
-
|
117
|
-
|
|
Accounts payable and
accrued liabilities
|
|
(6,189)
|
1,799
|
(11,417)
|
1,795
|
|
Deferred
revenue
|
|
(48)
|
(93)
|
(96)
|
(258)
|
|
|
|
27,755
|
35,355
|
38,327
|
45,316
|
|
Equity income from
joint ventures
|
|
(2,694)
|
(5,837)
|
(7,073)
|
(12,318)
|
|
Pension benefits
paid
|
|
(6)
|
(1)
|
(14)
|
(5)
|
|
Interest
paid
|
|
(44)
|
(9)
|
(214)
|
(10)
|
|
Income taxes expense
(recovery) - current
|
|
(999)
|
666
|
362
|
4,142
|
|
Income taxes paid
(recovered)
|
|
999
|
(1,385)
|
(362)
|
(3,209)
|
Net cash from
operating activities
|
|
25,011
|
28,789
|
31,026
|
33,916
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
Capital
expenditures
|
|
(6,857)
|
(24,909)
|
(11,874)
|
(42,973)
|
Change in non-cash
working capital related to capital
|
|
(18)
|
(5,173)
|
(7,285)
|
(6,545)
|
Net distributions
from investments in joint ventures
|
|
3,094
|
4,356
|
9,711
|
7,175
|
Change in cash
restricted for loan guarantees
|
|
899
|
(3,431)
|
899
|
(3,431)
|
Change in term
deposits
|
|
-
|
-
|
-
|
5,000
|
Proceeds on sale of
assets
|
|
81
|
1,241
|
786
|
1,242
|
Net cash used in
investing activities
|
|
(2,801)
|
(27,916)
|
(7,763)
|
(39,532)
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
Change in operating
loan facility
|
|
(17,314)
|
-
|
(17,500)
|
-
|
Dividends
paid
|
|
(1,525)
|
(1,526)
|
(3,050)
|
(2,965)
|
Repurchase of share
capital
|
|
-
|
-
|
-
|
(427)
|
Net cash used in
financing activities
|
|
(18,839)
|
(1,526)
|
(20,550)
|
(3,392)
|
|
|
|
|
|
|
|
Increase
(decrease) in cash
|
|
3,371
|
(653)
|
2,713
|
(9,008)
|
Cash, beginning of
period
|
|
1,354
|
5,643
|
2,012
|
13,998
|
|
|
|
|
|
|
|
Cash, End of
Period
|
|
$ 4,725
|
$
4,990
|
$ 4,725
|
$
4,990
|
SOURCE AKITA Drilling Ltd.