CALGARY, AB, Oct. 29, 2020 /CNW/ - AKITA Drilling Ltd.
(TSX: AKT.A)
AKITA Drilling Ltd. (the "Company") announces results for the
nine months ended September 30, 2020.
The Company recorded a net loss of $8,203,000 and adjusted EBITDA of $1,635,000 in the third quarter of 2020 compared
to $5,397,000 and $4,690,000 in the same period of 2019. Reduced
activity in the quarter was the key driver for the lower
results.
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 in
North America is clearly reflected
in the reduced drilling activity level over the third quarter of
2020. In Canada, the active rig
count decreased 57% to 86 active rigs in September of 2020 from 196
rigs in September of 2019. In the United
States, the decline was even greater at a 70% decrease as
the active rig count fell to 261 rigs at the end of September 2020, from 860 rigs at the same point
in 2019. AKITA's operating days decreased 55% to 531 for the third
quarter of 2020 from 1,181 in the third quarter of 2019. This
decrease in activity had a corresponding impact on the Company's
revenue, which decreased to $18,849,000 in the third quarter of 2020 from
$42,610,000 in the same period of
2019.
On September 22, 2020, the Company
and its syndicate of lenders extended the Company's covenant relief
period by one quarter to September 30,
2021. It is the Company's intent to extend its relief period
on a quarterly basis as needed. The covenants for the extension are
a debt to tangible net worth ratio not to exceed 0.75 and an
interest to EBITDA ratio that is greater than 0.75 as well as a
minimum trailing twelve-month EBITDA threshold.
Karl Ruud, AKITA's President and
Chief Executive Officer stated: "AKITA's strong relationships
with its banks and its top tier customer base will allow us to
retain our standard of excellence throughout this most challenging
cycle."
CONSOLIDATED FINANCIAL HIGHLIGHTS
|
($Thousands except
per share amounts)
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
|
2020
|
2019
|
Change
|
%
Change
|
2020
|
2019
|
Change
|
%
Change
|
|
Revenue
|
18,849
|
42,610
|
(23,761)
|
(56%)
|
98,780
|
134,072
|
(35,292)
|
(26%)
|
|
Operating
and
maintenance
expenses
|
13,719
|
33,219
|
(19,500)
|
(59%)
|
75,785
|
102,091
|
(26,306)
|
(26%)
|
|
Operating
income
|
5,130
|
9,391
|
(4,261)
|
(45%)
|
22,995
|
31,981
|
(8,986)
|
(28%)
|
|
Margin %
|
27%
|
22%
|
5
|
23%
|
23%
|
24%
|
(1)
|
(4%)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA(1)
|
1,635
|
4,690
|
(3,055)
|
(65%)
|
16,265
|
16,992
|
(727)
|
(4%)
|
|
Per
share
|
0.04
|
0.12
|
(0.08)
|
(67%)
|
0.41
|
0.43
|
(0.02)
|
(5%)
|
|
|
|
|
|
|
|
|
|
|
Adjusted funds flow
from operations(1)
|
(669)
|
3,033
|
(3,702)
|
(122%)
|
11,583
|
12,333
|
(750)
|
(6%)
|
|
Per
share
|
(0.02)
|
0.08
|
(0.10)
|
(125%)
|
0.29
|
0.31
|
(0.02)
|
(6%)
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(8,203)
|
(5,397)
|
(2,806)
|
(52%)
|
(65,682)
|
(11,932)
|
(53,750)
|
(450%)
|
|
Per
share
|
(0.21)
|
(0.14)
|
(0.07)
|
(50%)
|
(1.66)
|
(0.30)
|
(1.36)
|
(453%)
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
742
|
3,301
|
(2,559)
|
(78%)
|
5,881
|
11,083
|
(5,202)
|
(47%)
|
|
Dividends
declared
|
-
|
-
|
-
|
0%
|
-
|
6,734
|
(6,734)
|
(100%)
|
|
Weighted average
shares outstanding
|
39,608
|
39,608
|
-
|
0%
|
39,608
|
39,608
|
-
|
0%
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
278,072
|
376,877
|
(98,805)
|
(26%)
|
278,072
|
376,877
|
(98,805)
|
(26%)
|
|
Total debt
|
74,252
|
82,318
|
(8,066)
|
(10%)
|
74,252
|
82,318
|
(8,066)
|
(10%)
|
|
(1)
Non-GAAP Items
|
|
|
|
|
|
|
|
|
OPERATIONAL HIGHLIGHTS
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
|
2020
|
2019
|
Change
|
% Change
|
2020
|
2019
|
Change
|
% Change
|
|
Operating
days
|
|
|
|
|
|
|
|
|
|
Canada
|
134
|
338
|
(204)
|
(60%)
|
846
|
1,216
|
(370)
|
(30%)
|
|
United
States
|
397
|
843
|
(446)
|
(53%)
|
2,048
|
2,991
|
(943)
|
(32%)
|
|
|
|
|
|
|
|
|
|
|
Revenue per
operating day(1)
|
|
|
|
|
|
|
|
|
|
Canada(2)
|
38,881
|
37,601
|
1,280
|
3%
|
34,132
|
32,935
|
1,197
|
4%
|
|
United
States
|
34,375
|
35,918
|
(1,543)
|
(4%)
|
36,588
|
32,401
|
4,187
|
13%
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance per operating day(1)
|
|
|
|
|
|
|
|
|
|
Canada(2)
|
23,687
|
30,920
|
(7,233)
|
(23%)
|
25,246
|
24,718
|
528
|
2%
|
|
United
States
|
26,569
|
27,444
|
(875)
|
(3%)
|
28,548
|
24,818
|
3,730
|
15%
|
|
|
|
|
|
|
|
|
|
|
Utilization
|
|
|
|
|
|
|
|
|
|
Canada
|
7%
|
16%
|
(9%)
|
(56%)
|
13%
|
19%
|
(6%)
|
(32%)
|
|
United
States
|
24%
|
54%
|
(30%)
|
(56%)
|
42%
|
64%
|
(22%)
|
(34%)
|
|
|
|
|
|
|
|
|
|
|
(1)
Non-GAAP items
|
|
(2) Includes AKITA's share of Joint
Venture revenue and expenses.
|
United States Drilling Division
Activity levels in the US appear to have reached a low point of
the current cycle in the third quarter of 2020, bottoming out at
244 active rigs throughout the industry in August of 2020 and
increasing from there. For AKITA, third quarter revenue declined by
55% to $13,647,000 from $30,279,000 in the third quarter of 2019 due to
the decrease in operating days, which fell to 397 days in the third
quarter of 2020, from 843 days in the third quarter of 2019. The
impact of COVID-19 on both the demand for and the price of oil were
the dominant factors contributing to the decrease in activity for
drilling services.
The Company has four drilling rigs under contract, two active
rigs contracted into the second quarter of 2021 and two rigs
currently receiving standby revenue into the fourth quarter of
2021. The Company also currently has three rigs operating in the
spot market and is anticipating this will increase as the market
strengthens.
Canadian Drilling Division
The Canadian drilling industry has also been significantly
impacted by the COVID-19 related pressure on oil demand. During the
third quarter of 2020, AKITA achieved 134 operating days in
Canada, which corresponds to a
utilization rate of 7%, compared to 16% (338 days) in the third
quarter of 2019, with an industry average of 9% in the third
quarter of 2020 compared to 23% 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 $5,210,000 in the third quarter of
2020 from $12,709,000 in the same
period of 2019. Currently the Company has one rig operating in
Canada and is providing labour
services on another rig. The Company's active rig count in
Canada is expected to increase as
the winter drilling season commences.
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 September 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 third 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.
