CALGARY, AB, Aug. 4, 2020 /CNW/ - AKITA Drilling
Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. (the "Company") announces results for the
six months ended June 30, 2020. The
Company's net loss of $5,221,000 in
the second quarter of 2020 was consistent with the second quarter
of 2019 ($5,067,000), as was adjusted
EBITDA of $2,985,000 in the second
quarter of 2020 compared to $3,179,000 in the same period of 2019. Although
the Company's net loss and adjusted EBITDA were in-line with the
prior year, activity in the quarter was down
significantly.
In March 2020, the World Health
Organization declared a global pandemic related to COVID-19. To
date, the COVID-19 related economic slowdown has resulted in
significant declines and volatility in the stock markets as well as
steep reductions in both global oil demand and prices. There
remains significant uncertainty surrounding the future impact of
COVID-19 on demand and prices for the Company's drilling
services.
The impact of COVID-19 on demand for drilling services is
clearly reflected in the reduced drilling activity level in the
second quarter. Operating days decreased 50% to 643 for the second
quarter of 2020 from the second quarter of 2019. This decrease in
activity had a corresponding impact on the Company's revenue.
AKITA's management mitigated the economic impact of the
pandemic environment in the second quarter through significant cost
cutting including: reducing corporate overhead through a reduction
in staffing levels, wage reductions from 5% to 50%, working with
our vendors to reduce and minimize expenses, and receiving
government subsidies. This mitigation ensured that despite activity
decreasing 50% and revenue decreasing 33%, quarter-over-quarter,
adjusted EBITDA and net loss remained relatively constant.
As disclosed on July 20, 2020, the
Company's credit facility has been amended to include five quarters
of covenant relief, from and including the second quarter of 2020
to and including the second quarter of 2021. This covenant relief
period will allow the Company access to the liquidity it may
require.
Karl Ruud, AKITA's President and
Chief Executive Officer stated: "We have adjusted our
operations to cope with the current environment to ensure AKITA is
well positioned to participate in the industry recovery, when it
happens."
CONSOLIDATED FINANCIAL HIGHLIGHTS
|
($Thousands except
per share amounts)
|
For the three months
ended June 30,
|
For the six months
ended June 30,
|
|
2020
|
2019
|
Change
|
%
Change
|
2020
|
2019
|
Change
|
%
Change
|
|
Revenue
|
26,359
|
39,119
|
(12,760)
|
(33%)
|
79,931
|
91,461
|
(11,530)
|
(13%)
|
|
Operating and
maintenance
expenses
|
20,874
|
32,004
|
(11,130)
|
(35%)
|
62,066
|
68,871
|
(6,805)
|
(10%)
|
|
Operating
income
|
5,485
|
7,115
|
(1,630)
|
(23%)
|
17,865
|
22,590
|
(4,725)
|
(21%)
|
|
Margin %
|
21%
|
18%
|
3%
|
17%
|
22%
|
25%
|
(3%)
|
(12%)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
2,985
|
3,179
|
(194)
|
(6%)
|
14,622
|
12,301
|
2,321
|
19%
|
|
Per
share
|
0.08
|
0.08
|
-
|
0%
|
0.37
|
0.31
|
0.06
|
19%
|
|
|
|
|
|
|
|
|
|
|
Adjusted funds flow
from
operations(1)
|
2,099
|
1,516
|
583
|
38%
|
12,253
|
9,300
|
2,953
|
32%
|
|
Per
share
|
0.05
|
0.04
|
0.01
|
25%
|
0.31
|
0.23
|
0.08
|
35%
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(5,221)
|
(5,067)
|
(154)
|
(3%)
|
(57,478)
|
(6,536)
|
(50,942)
|
(779%)
|
|
Per
share
|
(0.13)
|
(0.13)
|
-
|
0%
|
(1.45)
|
(0.17)
|
(1.28)
|
(753%)
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
1,612
|
6,759
|
(5,147)
|
(76%)
|
5,139
|
7,782
|
(2,643)
|
(34%)
|
|
Dividend
declared
|
-
|
3,367
|
(3,367)
|
(100%)
|
-
|
6,734
|
(6,734)
|
(100%)
|
|
Weighted average
shares
outstanding
|
39,608
|
39,608
|
-
|
0%
|
39,608
|
39,608
|
-
|
0%
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
292,819
|
391,162
|
(98,343)
|
(25%)
|
292,819
|
391,162
|
(98,343)
|
(25%)
|
|
Total debt
|
79,650
|
84,271
|
(4,621)
|
(5%)
|
79,650
|
84,271
|
(4,621)
|
(5%)
|
|
(1)
Non-GAAP Items
|
CONSOLIDATED OPERATIONAL HIGHLIGHTS
|
For the three months
ended June 30,
|
For the six months
ended June 30,
|
|
2020
|
2019
|
Change
|
% Change
|
2020
|
2019
|
Change
|
% Change
|
|
Operating
days
|
|
|
|
|
|
|
|
|
|
Canada
|
99
|
274
|
(175)
|
(64%)
|
712
|
878
|
(166)
|
(19%)
|
|
United
States
|
544
|
1,008
|
(464)
|
(46%)
|
1,652
|
2,148
|
(496)
|
(23%)
|
|
|
|
|
|
|
|
|
|
|
Revenue per
operating day(1)
|
|
|
|
|
|
|
|
|
|
Canada(2)
|
50,505
|
31,518
|
18,987
|
60%
|
33,239
|
31,141
|
2,098
|
7%
|
|
United
States
|
39,342
|
31,874
|
7,468
|
23%
|
37,097
|
31,019
|
6,078
|
20%
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance
expenses per operating day(1)
|
|
|
|
|
|
|
|
|
|
Canada(2)
|
41,061
|
21,515
|
19,546
|
91%
|
25,538
|
21,268
|
4,270
|
20%
|
|
United
States
|
31,031
|
22,743
|
8,288
|
36%
|
29,007
|
20,557
|
8,450
|
41%
|
|
|
|
|
|
|
|
|
|
|
Utilization
|
|
|
|
|
|
|
|
|
|
Canada
|
5%
|
13%
|
(8%)
|
(62%)
|
17%
|
21%
|
(4%)
|
(19%)
|
|
United
States
|
33%
|
65%
|
(32%)
|
(49%)
|
51%
|
70%
|
(19%)
|
(27%)
|
|
|
|
|
|
|
|
|
|
|
(1)
Non-GAAP Items
|
|
(2)
Includes AKITA's share of Joint Venture revenue and
expenses.
|
United States Drilling Division
Activity levels in the US were impacted by the collapse in oil
prices as rigs began to shut down near the end of the first quarter
and continued to slow down through the second quarter of 2020.
Revenue in the US was $21,402,000 for
the second quarter of 2020, down from $32,129,000 in the same period in 2019. This drop
in revenue is attributable to the decrease in operating days which
fell 46% to 544 operating days in the second quarter of 2020 from
1,008 operating days in the same period of 2019. The impact of
COVID-19 on both the demand for oil and gas and the price of West
Texas Intermediate ("WTI") were the dominant factors contributing
to the decrease in activity.
The total active rig count in the US dropped 64% from 728 rigs
at the end of March 2020 to 265
active rigs at the end of June 2020.
At June 30, 2020, the Company had
five drilling rigs with multi-year contracts representing
approximately 1,500 days. Of these contracts, one is due to
expire in 2020 and four in 2021.
Canadian Drilling Division
The sharp decline in oil prices late in the first quarter of
2020 impacted the demand for drilling services in Canada. During the second quarter of 2020,
AKITA achieved 99 operating days in Canada, which corresponds to a utilization
rate of 5%, compared to 13% (274 days) in the second quarter of
2019, with an industry average of 4% in the second quarter of 2020
compared to 18% in the same period of 2019. This decrease in
activity had a corresponding impact on revenue (including AKITA's
share of Joint Venture revenue) which decreased to $5,000,000 in the second quarter of 2020 from
$8,636,000 in the same period of
2019.
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,
2020, 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 ITEMS
This news release references Non-GAAP (Generally
Accepted Accounting Principles) items. Revenue per operating day,
operating and maintenance expense per operating day, adjusted
EBITDA and adjusted funds flow from operations are all considered
Non-GAAP items. Management feels that these Non-GAAP items are
useful in assessing the Company's performance. These terms do not
have standardized meanings prescribed under International Financial
Reporting Standards (IFRS) and may not be comparable to similar
measures used by other companies. For further information, see
"Basis of Analysis in this MD&A and Non-GAAP Items" in AKITA's
2020 second quarter Management's Discussion & Analysis.
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
(including as may be affected by the COVID-19 pandemic),
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.
