CALGARY,
AB, July 30, 2024 /CNW/ - AKITA Drilling
Ltd. (TSX: AKT.A)
AKITA Drilling Ltd. ("AKITA" or the "Company") announces results
for the six months ended June 30,
2024.
During the second quarter of 2024, the
Company repaid $17,000,000 in debt,
decreasing its outstanding debt balance from $70,000,000 to $53,000,000 and bringing the total debt reduction
in the past six quarters to $41,000,000. The Company's net income decreased
to a loss of $478,000 in the second
quarter of 2024 from earnings of $6,177,000 during the same period of 2023. The
slowed demand for drilling services in the US was the key driver of
lower results for the Company in the second quarter of 2024.
Additionally, the Company received $2,000,000 in Employee Retention Credits from the
IRS in the second quarter of 2023, which did not reoccur in 2024.
The slowdown in the US was partially offset by an increase in the
adjusted operating margin from Canada, which increased by 19% in the second
quarter of 2024 when compared to the second quarter of
2023.
Net cash from operations decreased to $10,913,000 for the three months ended
June 30, 2024, compared to
$16,150,000 in the same period of
2023, due to lower results in the quarter, partially offset by a
larger release of working capital in the second quarter of 2024
compared to the same period of 2023. In Canada, the Company operated 9 rigs in the
second quarter of 2024 (Q2 2023 – 9 rigs) and 8 rigs in the US (Q2
2023 – 14 rigs). The Company spent $7,126,000 on routine capital items in the second
quarter of 2024, up from $4,700,000
over the same period in 2023.
Colin Dease, AKITA's Chief
Executive Officer stated: "with $17
million of debt repaid in the quarter and activity looking
to improve on both sides of the border, we are anticipating a
strong second half of 2024."
CONSOLIDATED FINANCIAL HIGHLIGHTS
|
$Thousands except per
share amounts
|
|
For the three months
ended June 30,
|
For the six months
ended June 30,
|
|
2024
|
2023
|
Change
|
%
Change
|
2024
|
2023
|
Change
|
%
Change
|
|
Revenue
|
|
|
|
38,336
|
58,349
|
(20,013)
|
(34 %)
|
84,641
|
123,349
|
(38,708)
|
(31 %)
|
|
Operating and
maintenance expenses
|
|
29,806
|
41,988
|
(12,182)
|
(29 %)
|
63,317
|
87,414
|
(24,097)
|
(28 %)
|
|
Operating
margin
|
|
|
8,530
|
16,361
|
(7,831)
|
(48 %)
|
21,324
|
35,935
|
(14,611)
|
(41 %)
|
|
Margin %
|
|
|
|
22 %
|
28 %
|
(6 %)
|
(21 %)
|
25 %
|
29 %
|
(4 %)
|
(14 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash from operating
activities
|
|
10,913
|
16,150
|
(5,237)
|
(32 %)
|
17,861
|
15,736
|
2,125
|
14 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted funds flow
from operations(1)
|
|
6,387
|
12,620
|
(6,233)
|
(49 %)
|
17,647
|
27,779
|
(10,132)
|
(36 %)
|
|
Per
share
|
|
|
|
0.16
|
0.32
|
(0.16)
|
(50 %)
|
0.44
|
0.70
|
(0.26)
|
(37 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
|
(478)
|
6,177
|
(6,655)
|
(108 %)
|
2,149
|
15,699
|
(13,550)
|
(86 %)
|
|
Per
share
|
|
|
|
(0.01)
|
0.16
|
(0.17)
|
(106 %)
|
0.05
|
0.40
|
(0.35)
|
(88 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
7,126
|
4,700
|
2,426
|
52 %
|
11,061
|
7,204
|
3,857
|
54 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding
|
|
39,734
|
39,650
|
84
|
0 %
|
39,725
|
39,650
|
75
|
0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
242,353
|
266,330
|
(23,977)
|
(9 %)
|
242,353
|
266,330
|
(23,977)
|
(9 %)
|
|
Total debt
|
|
|
|
52,404
|
79,670
|
(27,266)
|
(34 %)
|
52,404
|
79,670
|
(27,266)
|
(34 %)
|
|
(1)See
"Non-GAAP and Supplementary Financial Measures" near the end of
this release for further detail.
|
|
|
|
Canadian Drilling Division
|
|
|
For the three months
ended June 30,
|
For the six months
ended June 30,
|
|
$Thousands except per
day amounts
|
|
2024
|
2023
|
Change
|
% Change
|
2024
|
2023
|
Change
|
% Change
|
|
Revenue
Canada
|
|
|
9,820
|
9,706
|
114
|
1 %
|
25,369
|
29,133
|
(3,764)
|
(13 %)
|
|
Revenue from joint
venture drilling rigs
|
9,631
|
9,161
|
470
|
5 %
|
22,148
|
16,943
|
5,205
|
31 %
|
|
Flow through
charges(1)
|
|
(1,055)
|
(1,180)
|
125
|
11 %
|
(1,684)
|
(2,009)
|
325
|
16 %
|
|
Adjusted revenue
Canada(1)
|
|
18,396
|
17,687
|
709
|
4 %
|
45,833
|
44,067
|
1,766
|
4 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance
expenses Canada
|
8,166
|
8,323
|
(157)
|
(2 %)
|
18,479
|
22,395
|
(3,916)
|
(17 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance expenses from joint venture drilling rigs
|
6,907
|
6,880
|
27
|
0 %
|
15,261
|
12,374
|
2,887
|
23 %
|
|
Flow through
charges(1)
|
|
(1,055)
|
(1,180)
|
125
|
11 %
|
(1,684)
|
(2,009)
|
325
|
16 %
|
|
Adjusted operating
and maintenance expenses Canada(1)
|
14,018
|
14,023
|
(5)
|
(0 %)
|
32,056
|
32,760
|
(704)
|
(2 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
margin Canada(1)
|
4,378
|
3,664
|
714
|
19 %
|
13,777
|
11,307
|
2,470
|
22 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Margin
%(1)
|
|
|
24 %
|
21 %
|
3 %
|
14 %
|
30 %
|
26 %
|
4 %
|
15 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
days
|
|
|
473
|
471
|
2
|
0 %
|
1,122
|
1,191
|
(69)
|
(6 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenue per
operating day(1)
|
38,892
|
37,552
|
1,340
|
4 %
|
40,849
|
37,000
|
3,849
|
10 %
|
|
Adjusted operating and
maintenance
expenses per operating day(1)
|
29,636
|
29,773
|
(137)
|
(0 %)
|
28,570
|
27,506
|
1,064
|
4 %
|
|
Adjusted operating
margin per operating day(1)
|
9,256
|
7,779
|
1,477
|
19 %
|
12,279
|
9,494
|
2,785
|
29 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization(1)
|
|
|
31 %
|
26 %
|
5 %
|
19 %
|
36 %
|
33 %
|
3 %
|
9 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Rig count
|
|
|
17
|
20
|
(3)
|
(15 %)
|
17
|
20
|
(3)
|
(15 %)
|
|
(1)
See "Non-GAAP and Supplementary Financial Measures" near the end of
this release for further detail.
|
|
During the second quarter of 2024, AKITA's
adjusted operating margin improved to $4,378,000 compared to $3,664,000 in the same quarter of 2023. This
increase was driven by higher average day rates in the quarter with
higher margin rigs achieving more operating days as well as higher
day rates across the fleet. AKITA's utilization over the second
quarter of 2024 was 31% comparable to the industry average over the
same period.
Adjusted revenue in Canada increased to $18,396,000 in the second quarter of 2024 from
$17,687,000 in the second quarter of
2023 despite comparable number of operating days between the two
quarters. Revenue per day increased to $38,892 in the second quarter of 2024 from
$37,552 in the same period of 2023.
Improved day rates are the key driver of the increased
revenue.
Higher revenue in the quarter was not offset by higher adjusted
operating and maintenance expenses which remained relatively flat
quarter over quarter with $14,018,000
in the second quarter of 2024 compared to $14,023,000 in the second quarter of 2023.
Increased revenue and flat costs resulted in a 19% increase in the
Canadian divisions adjusted operating margin.
United States Drilling Division
|
|
|
For the three months
ended June 30,
|
For the six months
ended June 30,
|
|
$Thousands except per
day amounts
|
|
2024
|
2023
|
Change
|
% Change
|
2024
|
2023
|
Change
|
% Change
|
|
Revenue US
|
|
|
28,516
|
48,643
|
(20,127)
|
(41 %)
|
59,272
|
94,216
|
(34,944)
|
(37 %)
|
|
Flow through
charges(1)
|
|
(3,583)
|
(4,499)
|
916
|
20 %
|
(7,342)
|
(9,073)
|
1,731
|
19 %
|
|
Adjusted revenue
US(1)
|
|
24,933
|
44,144
|
(19,211)
|
(44 %)
|
51,930
|
85,143
|
(33,213)
|
(39 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and
maintenance expenses US
|
21,640
|
33,664
|
(12,024)
|
(36 %)
|
44,837
|
65,019
|
(20,182)
|
(31 %)
|
|
Flow through
charges(1)
|
|
(3,583)
|
(4,499)
|
916
|
20 %
|
(7,342)
|
(9,073)
|
1,731
|
19 %
|
|
Adjusted operating
and maintenance expenses US(1)
|
18,057
|
29,165
|
(11,108)
|
(38 %)
|
37,495
|
55,946
|
(18,451)
|
(33 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating
margin US(1)
|
6,876
|
14,979
|
(8,103)
|
(54 %)
|
14,435
|
29,197
|
(14,762)
|
(51 %)
|
|
Margin
%(1)
|
|
|
28 %
|
34 %
|
(6 %)
|
(18 %)
|
28 %
|
34 %
|
(6 %)
|
(18 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
days
|
|
|
623
|
1,090
|
(467)
|
(43 %)
|
1,342
|
2,133
|
(791)
|
(37 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted revenue per
operating day(1)
|
40,021
|
40,499
|
(478)
|
(1 %)
|
38,696
|
39,917
|
(1,221)
|
(3 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating and
maintenance expenses per operating day(1)
|
28,984
|
26,757
|
2,227
|
8 %
|
27,940
|
26,229
|
1,711
|
7 %
|
|
Adjusted operating
margin per operating day(1)
|
11,037
|
13,742
|
(2,705)
|
(20 %)
|
10,756
|
13,688
|
(2,932)
|
(21 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Utilization(1)
|
|
|
46 %
|
80 %
|
(34 %)
|
(43 %)
|
49 %
|
79 %
|
(30 %)
|
(38 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
Rig count
|
|
|
15
|
15
|
-
|
0 %
|
15
|
15
|
-
|
0 %
|
|
(1)
See "Non-GAAP and Supplementary Financial Measures" near the end of
this release for further detail.
|
|
The decrease in the active rig count in the US continued to
impact the Company in the second quarter of 2024. Activity
decreased to 623 operating days in the second quarter of 2024, from
1,090 operating days in the second quarter of 2023. This decrease
in activity also impacted the Company's day rates as the pricing
pressure affecting the industry also affected AKITA.
Adjusted operating margin decreased to $6,876,000 in the second quarter of 2024 from
$14,979,000 in the same period of
2023. The primary cause of this decrease was the reduction in
activity between the two quarters, with AKITA's active rig count
falling to an average of 8 rigs in the second quarter of 2024 from
14 rigs in the second quarter of 2023. The Company's 43% decrease
in active rigs between the second quarter of 2023 and the second
quarter of 2024 was more pronounced than the 27% decrease in the
industry average rig count for the same period, however the
industry rig count began to decline starting in the first quarter
of 2023, while AKITA did not begin to see a decline until the third
quarter of 2023. Also contributing to the decrease in adjusted
operating margin was an increase in adjusted operating and
maintenance expenses per operating day, which increased 8%, as well
as a 1% decrease in adjusted revenue per operating day.
Adjusted operating expense per operating day increased to
$28,948 per day in the second quarter
of 2024 from $26,757 in the second
quarter of 2023. In the second quarter of 2023 the Company received
$2,000,000 in Employee Retention
Credits ("ERC") from the IRS, which reduced operating and
maintenance costs. Adjusting for the ERC payment, operating costs
per operating day only increased 1% quarter over quarter despite
increasing costs throughout the industry.
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 2024 will be available on the AKITA website
(www.akita-drilling.com) or via SEDAR+ (sedarplus.ca) or can be
requested in print from the Company.
Non-GAAP and Supplementary Financial Measures
Non-GAAP Financial Measures
Adjusted Revenue and Adjusted 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 expense 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.
|
$Thousands
|
For the three months
ended June 30,
|
For the six months
ended June 30,
|
|
2024
|
2023
|
2024
|
2023
|
|
Net cash from operating
activities
|
10,913
|
16,150
|
17,861
|
15,736
|
|
Interest
paid
|
1,175
|
1,531
|
2,385
|
3,709
|
|
Interest
expense
|
(1,224)
|
(1,584)
|
(2,483)
|
(3,815)
|
|
Post-employment
benefits paid
|
79
|
79
|
158
|
165
|
|
Equity income from
joint ventures
|
2,632
|
2,150
|
6,675
|
4,334
|
|
Change in non-cash
working capital
|
(7,188)
|
(5,706)
|
(6,949)
|
7,650
|
|
Adjusted funds flow
from operations
|
6,387
|
12,620
|
17,647
|
27,779
|
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. In particular,
forward-looking information in this news release includes, but is
not limited to, references to the outlook for the drilling industry
(including activity levels and day rates), the Company's
relationships and customers and vendors, advantages associated with
the percentage of pad drilling rigs in the Company's Canadian
drilling fleet, the renewal of drilling contracts, and debt
repayment.
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.
Although the Company believes that the expectations reflected
in the forward-looking information are reasonable based on the
information available on the date such statements are made and
processes used to prepare the information, such statements are not
guarantees of future performance and no assurance can be given that
these expectations will prove to be correct. By their nature, these
forward-looking statements involve numerous assumptions, inherent
risks and uncertainties, both general and specific, and therefore
carry 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.
The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result
of, among other things, prevailing economic conditions; the level
of exploration and development activity carried on by AKITA's
customers, world crude oil prices and North American natural gas
prices; global liquefied natural gas (LNG) demand, weather, access
to capital markets; and government policies. We caution that
the foregoing list of factors is not exhaustive and that while
relying on forward-looking statements to make decisions with
respect to AKITA, 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 where
required by law, the Company does not undertake to update any
forward-looking statement, whether written or oral, that may be
made from time to time by it or on its behalf
SOURCE AKITA Drilling Ltd.