CALGARY, Nov. 5, 2018 /CNW/ - AKITA Drilling Ltd.'s
net loss for the three months ended September 30, 2018 was $5,459,000 (net loss of $0.24 per share basic and diluted) on revenue of
$22,465,000 compared to a net loss of
$3,811,000 (net loss of $0.21 per share basic and diluted) on revenue of
$14,908,000 for the corresponding
period of 2017. Funds flow from operations decreased to a loss of
$638,000 in the third quarter of 2018
from $1,472,000 in the corresponding
period of 2017.
AKITA incurred a net loss of $10,329,000 for the nine months ended
September 30, 2018 ($0.53 per share basic and diluted) on revenue of
$66,847,000 compared to net loss of
$13,277,000 ($0.74 per share basic and diluted) on revenue of
$52,807,000 in the comparative period
in 2017. Funds flow from operations for the January to September
period of 2018 was $5,519,000
compared to $6,549,000 for the same
period in 2017.
On September 11, 2018, AKITA's
completed the acquisition of United
States based Xtreme Drilling Corp. ("Xtreme"), and the
strategy to integrate the two companies into one premium pure play
drilling company with balanced operations in Canada and the
United States was initiated. While significant
progress in the corporate integration has already been achieved,
the integration process remains ongoing as Management strives to
unlock additional cost saving synergies and to implement further
operating efficiencies. As of September 30, 2018, AKITA commands a total fleet
of 40 rigs, comprised of a 17 rig United
States fleet and a 23 rig Western Canadian fleet.
In Canada, AKITA achieved 483
operating days or 25% utilization over Q3 2018, a significant drop
from 810 operating days or 32% utilization over the same period in
2017. Notwithstanding a significant improvement in West Texas
Intermediate oil pricing ("WTI"), up to an average of $70.23 USD/bbl for September 2018 as compared to $49.82 USD/bbl for September 2017, demand for drilling rigs in
Canada was severely curtailed with
natural gas prices for Q3 of 2018 compared to Q3 of 2017 and by the
material differential in pricing between WTI and Western Canadian
Select oil (the "Differential"). The Differential averaged
$29.86 USD/bbl for September 2018 compared to $9.89 USD/bbl for September 2017. Utilization levels remained flat
when compared to the third quarter of 2017 and day rates remained
largely unchanged, resulting in a continuation of a low margin
environment affecting both funds flow from operations and net
earnings.
Although sustained low margins in the Canadian drilling industry
resulted in a further reduction of 35 rigs in the Western Canadian
rig fleet, resulting in a total fleet size of 602 rigs compared to
637 rigs in the year prior, the existing fleet is still more than
capable of meeting current industry drilling demands.
Accordingly, higher utilization rates are needed across
Western Canada to influence day
rate pricing in a meaningful way.
In the United States, the
drilling industry is stronger and more active than in Western Canada. As at September 30, 2018, AKITA was operating 15 rigs
out of its 17 rig United States
fleet, equal to an 88% utilization level. AKITA will evaluate
further opportunities to add to the four rigs deployed to the
United States Permian market from Canada in 2018 should suitable opportunities
allow. In addition, AKITA has rebranded the Xtreme fleet of high
specification late model AC triples to the AKITA name, which has a
long history of operating top quality drilling services, and
further integrated the United
States fleet.
Selected information from AKITA Drilling Ltd.'s Management
Discussion and Analysis from the Quarterly Report as
follows:
Introduction and General Overview
During the third quarter of 2018, the Company closed on the
acquisition of Xtreme Drilling Corp.("Xtreme"). Xtreme is a
United States based drilling
company with 13 high specification triple drilling rigs operating
in several US basins. With the acquisition of Xtreme, AKITA's
United States fleet now includes
17 drilling rigs giving the Company a well-balanced fleet between
Canada (23 drilling rigs) and
the United States. The closing
date of the Xtreme acquisition was September
11, 2018, and results in this MD&A include 19 days of
Xtreme's operations. The focus of this MD&A is on AKITA's
financial results for the three and nine months ended September 30, 2018.
Activity levels in the contract drilling industry are highly
correlated to the market prices of crude oil and natural gas.
Average West Texas Intermediate ("WTI") crude oil prices for the
third quarter of 2018 were 45% higher than in the same period of
2017 and 32% higher on a year-to-date basis when comparing the nine
months ended September 30, 2018, to
the corresponding period in 2017. Increasing crude oil prices have
not impacted activity in the Canadian industry.
Limited access to markets for Canadian oil is the cause of the
essentially stagnant activity in the Canadian market. Canadian oil
is deeply discounted compared to WTI prices which is causing
Canadian producers to delay capital spending in Canada or shift capital spending to other
international markets if available.
AKITA had 40 drilling rigs at September
30, 2018, including five that operated under joint ventures
(38.75 net to AKITA), compared to 28 rigs as at September 30, 2017. During the third quarter of
2018, a fourth rig was moved from Canada to the United
States leaving 23 rigs in Canada. Also during the quarter, AKITA
acquired Xtreme, adding 13 drilling rigs to AKITA's United States fleet bringing the total up to
17.
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Canada1
|
|
|
|
|
|
|
|
|
|
Operating
days
|
483
|
810
|
(327)
|
(40%)
|
|
2,164
|
2,701
|
(537)
|
(20%)
|
Utilization
rate
|
25%
|
32%
|
(7)
|
(22%)
|
|
33%
|
36%
|
(3)
|
(8%)
|
United
States2
|
|
|
|
|
|
|
|
|
|
Operating
days
|
381
|
-
|
381
|
-
|
|
558
|
-
|
558
|
-
|
Utilization
rate
|
62%
|
-
|
62
|
-
|
|
52%
|
-
|
52
|
-
|
(1)
|
Canadian utilization
was calculated based on an average of 24 rigs in Canada for the
first three quarters of 2018.
|
(2)
|
United States
utilization was calculated based on the number of rigs in the
United States in the quarter plus the 19 days of utilization for
the 13 rigs acquired on September 11, 2018, which were 81% utilized
during the 19 days.
|
|
|
|
Utilization Rates
in Canada
|
Three Months
Ended
September
30
|
Nine Months
Ended
September
30
|
|
AKITA
|
Industry(1)
|
AKITA
|
Industry(1)
|
2018
|
23%
|
30%
|
33%
|
29%
|
2017
|
32%
|
30%
|
36%
|
29%
|
|
|
|
|
|
(1) Source:
CAODC
|
Generally, AKITA meets or exceeds industry average rig
utilization rates as a result of positive customer relations,
meaningful joint ventures with Aboriginal and First Nations
partners, employee expertise, safety performance, drilling
performance and because the majority of the Company's rig fleet are
high-demand pad drilling rigs.
For the three months ended September 30,
2018, AKITA's utilization fell below industry average due to
AKITA's customers delaying capital programs as a result of pricing
differentials between Canada and
the United States.
Activity in the United States
continues to be very strong and AKITA ended the quarter with 15 of
17 drilling rigs operating. The acquisition of Xtreme added 221
operating days for the period of September
12 to September 30, 2018.
Revenue and Operating & Maintenance Expenses
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
$Millions
|
2018
|
2017
|
Change
|
%
Change
|
2018
|
2017
|
Change
|
%
Change
|
Total drilling
revenue
|
22.5
|
14.9
|
7.6
|
51%
|
66.8
|
52.1
|
14.7
|
28%
|
Operating &
maintenance expenses
|
18.8
|
11.8
|
7.0
|
60%
|
51.3
|
44.2
|
7.1
|
16%
|
|
|
|
|
|
|
|
|
|
$Dollars
|
2018
|
2017
|
Change
|
%
Change
|
2018
|
2017
|
Change
|
%
Change
|
AKITA and joint
ventures' revenue per operating day(1)
|
33,398
|
25,586
|
7,812
|
31%
|
30,985
|
26,400
|
4,585
|
17%
|
AKITA and joint
ventures' operating & maintenance expenses per operating
day(1)
|
26,314
|
20,287
|
6,027
|
30%
|
23,360
|
21,514
|
1,846
|
9%
|
AKITA and joint
ventures' operating margin per operating day
|
7,084
|
5,299
|
1,785
|
34%
|
7,626
|
4,886
|
2,740
|
56%
|
(1)
|
AKITA and joint
ventures' revenue per operating day and AKITA and joint ventures'
operating & maintenance expenses per operating day are non-GAAP
financial measures. See "Basis of Analysis in this MD&A,
Non-GAAP and Additional GAAP Items".
|
Third Quarter Comparatives
During the third quarter of 2018, revenue increased to
$22,465,000 compared to $14,908,000 during the third quarter of 2017 as a
result of increased revenue per day which increased to $33,398 from $25,586 between the two quarters. The increase in
revenue per day is attributable to both general rate increases in
the Canadian market, as well as operating days in the United States where revenue per day on
average is higher than in Canada.
Operating and maintenance expenses are directly related to
operating days and amounted to $18,800,000 ($26,314 per operating day) during the third
quarter of 2018, compared to $11,800,000 ($20,287 per operating day) during the same period
of the prior year. The increase in operating and maintenance
expenses for both the total and per-day amounts, is due to costs to
move rigs to the United States
from Canada and the costs to start
up those rigs. Also contributing to the increase in direct cost per
day is the mix of rigs working, with higher cost rigs working in
the third quarter of 2018 compared to the same period in 2017.
Year-to-Date Comparatives
During the first nine months of 2018, revenue increased to
$66,847,000 from $52,087,000 during the first nine months of 2017
as a result of higher revenue per day. Revenue per operating day
increased to $30,985 during the first
nine months of 2018 from $26,400 in
the comparative nine month period of 2017. The increase in revenue
per day is due to higher Canadian day rates and more United States activity as noted above, as well
as the mix of rigs that worked as pad triple drilling rigs earn
more revenue per day than conventional rigs.
Operating and maintenance expenses are tied to operating days
and amounted to $51,323,000
($23,360 per operating day) during
the first nine months of 2018 compared to $44,172,000 ($21,514 per operating day) in the same period of
the prior year. The increase in operating costs for both the
year-to-date and three months ended September 30, 2018, is due to the move and
start-up costs related to relocated rigs to the United States from Canada and the increased utilization of
higher-cost rigs working in the year when compared to the same
period in 2017.
Depreciation and Amortization Expense
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
$ Millions
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Depreciation and
amortization expense
|
6.0
|
6.6
|
(0.6)
|
(9%)
|
|
17.4
|
21.0
|
(3.6)
|
(17%)
|
Depreciation and amortization expense decreased to $6,008,000 during the third quarter of 2018 from
$6,550,000 during the corresponding
period in 2017, primarily due to an asset write-down and asset
impairment loss recorded in the fourth quarter of 2017, which
reduced the Company's depreciable property by $29,123,000. This asset write-down and asset
impairment loss also affected the depreciation and amortization
expense for the first nine months of 2018 which decreased to
$17,421,000 compared to $21,020,000 for the corresponding period in
2017.
On January 1, 2018, AKITA changed
its depreciation method to a straight-line calculation from a
unit-of-production basis on drilling rig assets. The rationale for
this change was to have rig depreciation more closely match the new
lifecycle of rigs. Drilling technology is a critical component of
modern drilling rigs and drilling rigs' useful lives are reduced as
new technologies are utilized for modern drilling programs. As a
result, the passage of time plays a more significant role than
operating days in determining a drilling rig's life. Accordingly,
the straight-line depreciation method matches the new lifecycle
more accurately than the unit-of-production depreciation
method. The estimated effect of the change in depreciation
method on the Company's interim financial statements for the first
three quarters of 2018 is not material. In the first nine
months of 2018, drilling rig depreciation accounted for 97% of
total depreciation expense (2017 - 97%).
While AKITA conducts some 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 by
the joint ventures themselves. As the joint ventures do not
hold any property, plant, or equipment assets directly, the
Company's depreciation expense includes depreciation on assets
involved in both wholly-owned and joint venture activities.
Selling and Administrative Expenses
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
$ Millions
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Selling &
administrative expenses
|
6.9
|
2.9
|
4.0
|
138%
|
|
15.4
|
10.2
|
5.2
|
51%
|
Selling and administrative expenses were 23% of revenue in the
first nine months of 2018 compared to 14% of revenue in the first
nine months of 2017. The increase is due primarily to costs
incurred for the acquisition of Xtreme which accounted for over
half of the increase. The other portion of the increase relates to
AKITA's United States operations,
including both the former Xtreme entities and AKITA's existing
United States
operations.
Equity Income from Joint Ventures
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
$ Millions
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Operating
Days
|
192
|
260
|
(68)
|
(26%)
|
|
653
|
778
|
(125)
|
(16%)
|
Proportionate share
of revenue from joint ventures
|
6.4
|
5.8
|
0.6
|
10%
|
|
17.5
|
19.2
|
(1.7)
|
(9%)
|
Proportionate share
of operating & maintenance expenses from joint
ventures
|
3.9
|
4.6
|
(0.7)
|
(15%)
|
|
12.3
|
13.9
|
(1.6)
|
(12%)
|
Proportionate share
of selling & administrative expenses from joint
ventures
|
0.1
|
0.1
|
0.0
|
0%
|
|
0.2
|
0.3
|
(0.1)
|
(33%)
|
Equity income from
joint ventures per interim financial statements
|
2.4
|
1.1
|
1.3
|
118%
|
|
5.0
|
5.0
|
0.0
|
0%
|
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.
Equity income from joint ventures increased during the three and
nine months ended September 30, 2018
compared to the same period in 2017 due to increases in revenue
per-day for the Company's joint venture rigs. Operating expenses
for the joint venture rigs decreased during the three and nine
months ended September 30, 2018 due
to reduced activity.
Other Income (Loss)
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
$ Millions
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Total other
income
(loss)
|
(0.3)
|
0.1
|
(0.4)
|
(400%)
|
|
(0.2)
|
0.5
|
(0.7)
|
(140%)
|
Total other income is the aggregate of interest income, interest
expense, gain on sale of assets, and net other gains all of which
are discussed below in detail.
Interest income decreased to $65,000 in the first nine months of 2018 from
$342,000 in the corresponding period
in 2017. The decrease is related to the collection of the
interest-bearing long-term receivable held related to contract
cancellation revenue recorded in 2016. This long-term receivable
was collected over three years with the final payment received in
the first quarter of 2018.
During the first nine months of 2018, the Company incurred
interest expense of $441,000 compared
to $126,000 in the same period of
2017. Interest expense is comprised of $128,000 related to the future cost of the
Company's defined benefit pension plan and $253,000 interest on the Company's credit
facility with the balance related to debt assumed with the
acquisition of Xtreme.
Income Tax Expense (Recovery)
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
$ Millions
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Current tax expense
(recovery)
|
0.0
|
0.1
|
(0.1)
|
(100%)
|
|
(0.0)
|
(3.0)
|
3.0
|
100%
|
Deferred tax expense
(recovery)
|
(1.7)
|
(1.4)
|
(0.3)
|
(21%)
|
|
(2.2)
|
(1.6)
|
(0.6)
|
(38%)
|
Income tax expense
(recovery)
|
(1.7)
|
(1.3)
|
(0.4)
|
(31%)
|
|
(2.2)
|
(4.6)
|
2.4
|
52%
|
Income tax recovery decreased to $2,249,000 in the first nine months of 2018 from
$4,633,000 in the corresponding
period in 2017, mainly due a smaller loss for tax purposes recorded
in the first three quarters of 2018 compared to 2017. There was no
current tax recovery recorded in 2018 as all potential loss
carryback amounts have been utilized.
Net Income (Loss), Funds Flow and Net Cash From Operating
Activities
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
$ Millions
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Net loss
|
(5.5)
|
(3.8)
|
(1.7)
|
(45%)
|
|
(10.3)
|
(13.3)
|
3.0
|
23%
|
Funds flow from
operations(1)
|
(0.6)
|
1.5
|
(2.1)
|
(140%)
|
|
5.5
|
6.5
|
(1.0)
|
(15%)
|
(1)
|
Funds flow from
operations is an additional GAAP measure under IFRS. See
commentary in "Basis of Analysis in this MD&A, Non-GAAP and
Additional GAAP Items".
|
During the three months ended September
30, 2018, the Company reported a net loss of $5,459,000 or $0.24
per Class A Non-Voting and Class B Common share (basic and diluted)
compared to a net loss of $3,811,000
or $0.21 per share (basic and
diluted) in the comparative quarter of 2017. Funds flow from
operations decreased to negative $638,000 during the third quarter of 2018 from
$1,472,000 in the corresponding
quarter in 2017. The decrease in funds flow from operations and the
increase in net loss are both a result of acquisition costs
incurred in the quarter and move costs associated with relocating
rigs to the United States.
Net loss decreased to $10,329,000
or $0.53 per Class A Non-Voting and
Class B Common share (basic and diluted) for the first nine months
of 2018 from a net loss of $13,277,000 or $0.74 per share (basic and diluted) in the
corresponding period of 2017. Funds flow from operations
decreased to $5,519,000 during the
first nine months of 2018 from $6,549,000 in the corresponding period in
2017. The decrease in both net income and funds flow from
operations for the nine month period ended September 30, 2018 is directly attributable to
the transaction and move costs noted above.
The following table reconciles funds flow and cash flow from
operations:
|
Three Months Ended
September 30
|
|
Nine Months Ended
September 30
|
$ Millions
|
2018
|
2017
|
Change
|
%
Change
|
|
2018
|
2017
|
Change
|
%
Change
|
Funds flow from
operations(1)
|
(0.6)
|
1.5
|
(2.1)
|
(140%)
|
|
5.5
|
6.5
|
(1.0)
|
(15%)
|
Change in non-cash
working capital
|
(7.3)
|
(1.8)
|
(5.5)
|
(306%)
|
|
1.9
|
7.0
|
(5.1)
|
(73%)
|
Equity income from
joint ventures
|
(2.4)
|
(1.1)
|
(1.3)
|
118%
|
|
(5.0)
|
(5.0)
|
0.0
|
0%
|
Interest
Paid
|
0.3
|
0.0
|
0.3
|
100%
|
|
0.3
|
0.0
|
0.3
|
100%
|
Current income tax
expense (recovery)
|
0.0
|
0.1
|
(0.1)
|
(100%)
|
|
0.0
|
(3.0)
|
3.0
|
100%
|
Income tax
recovered
|
2.7
|
2.3
|
0.4
|
17%
|
|
2.7
|
2.3
|
0.4
|
17%
|
Net cash from (used
in) operating activities
|
(7.4)
|
1.0
|
(8.4)
|
(840%)
|
|
5.3
|
7.8
|
(2.5)
|
(32%)
|
(1)
|
Funds flow from
operations is an additional GAAP measure under IFRS. See
commentary in "Basis of Analysis in this MD&A, Non-GAAP and
Additional GAAP Items".
|
Liquidity and Capital Resources
Cash used for capital expenditures totalled $10,062,000 in the first nine months of 2018
(2017 - $16,779,000). All of the
capital spending year-to-date relates to general rig capital for
both Canada and the United States. In the same period of 2017
half of the capital spending related to the construction of a heavy
AC double pad drilling rig in Canada.
At September 30, 2018, AKITA's
Statements of Financial Position included working capital (current
assets minus current liabilities) of $10,573,000 compared to working capital of
$20,140,000 at September 30, 2017, and working capital of
$15,528,000 at December 31, 2017. Readers should 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 early in the second quarter and decline
thereafter as a result of spring break-up and reduced drilling
activities. Working capital at September 30,
2018 decreased compared to September
30, 2017, as a result of the transaction related costs
relating to the acquisition of Xtreme.
The Company chooses to maintain a conservative Statement of
Financial Position due to the cyclical nature of the industry. In
conjunction with the closing of the Xtreme acquisition the Company
entered into a new operating loan facility with its principal
banker totalling $125,000,000 that is
available until 2022. The interest rate ranges from 50 to 200
basis points over prime interest rates depending on the funded debt
to EBITDA ratio. Security for this facility includes all
present and after-acquired personal property and a first floating
charge over all other present and after-acquired property including
real property.
Future Outlook
The drilling industry is cyclical and certain key factors that
have an effect on AKITA's results are beyond management's
control. Like other drilling contractors, AKITA is exposed to
the effects of fluctuating crude oil and natural gas prices and
changes in the exploration and development budgets of its
customers.
With the winter drilling season approaching in Canada activity levels have begun to increase.
The Company is focussing on efficient rig start-ups and on cost
control. The Company anticipates that 2019 will be another
challenging year for the Canadian drilling industry and AKITA.
In the United States, the
Company is anticipating a very active year for 2019. The focus for
the fourth quarter of 2018 and the first quarter of 2019 will be on
the integration of the Xtreme operations into AKITA's operations,
and ensuring that AKITA's attention to safety and customer
satisfaction is a focus in the United
States. Additional rig moves from Canada to the United
States will be evaluated as opportunities arise. The Xtreme
rigs and operations are being rebranded to AKITA to capitalize on
AKITA's quality reputation and long-term relationships with
multi-national oil companies.
Capital spending in both Canada
and the United States will be
limited to maintenance capital with larger projects undertaken only
when an immediate return is planned. Overall the Company's capital
objective will be to strengthen the balance sheet and repay debt
when possible.
With AKITA's modern fleet of 23 drilling rigs in Canada and 17 drilling rigs in the United States, the Company is well
positioned to capitalize on opportunities in both countries.
Shareholder value will remain a key initiative for the Company and
management welcomes our new shareowners to the Company.
Basis of Analysis in this MD&A, Non-GAAP and Additional
GAAP Items
AKITA and its joint ventures' revenue per operating day and
AKITA and its joint ventures' operating and maintenance expenses
per operating day are not recognized GAAP measures under
International Financial Reporting Standards ("IFRS").
Management and certain investors may find "per operating day"
measures for AKITA and joint ventures' revenue indicate pricing
strength while AKITA and joint ventures' operating and maintenance
expenses 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 drilling rigs that
are utilized can also influence these results.
Funds flow from operations is considered an additional GAAP item
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, equity income from joint ventures, and income tax amounts
paid or recovered during the period. Management and certain
investors may find 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.
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 MD&A 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 Statements
of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
September
30,
|
September
30,
|
December
31,
|
$
Thousands
|
|
|
2018
|
2017
|
2017
|
ASSETS
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
|
|
|
$
12,261
|
$
4,675
|
$
560
|
Accounts
receivable
|
|
|
39,215
|
23,474
|
27,024
|
Income taxes
recoverable
|
|
|
829
|
3,051
|
3,076
|
Prepaid expenses and
other
|
|
|
1,450
|
567
|
89
|
Assets held for
sale
|
|
|
1,314
|
-
|
-
|
|
|
|
55,069
|
31,767
|
30,749
|
Non-current
Assets
|
|
|
|
|
|
Restricted
cash
|
|
|
1,092
|
1,890
|
1,525
|
Other long-term
assets
|
|
|
1,334
|
748
|
528
|
Investments in joint
ventures
|
|
|
3,275
|
4,359
|
4,096
|
Property, plant and
equipment
|
|
|
350,797
|
201,819
|
170,599
|
TOTAL
ASSETS
|
|
|
$
411,567
|
$
240,583
|
$
207,497
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
|
|
$
35,701
|
$
10,102
|
$
13,696
|
Dividends
payable
|
|
|
3,367
|
1,525
|
1,525
|
Deferred
income
|
|
|
1,100
|
-
|
-
|
Current portion
finance leases
|
|
|
578
|
-
|
-
|
Current portion of
long-term debt
|
|
|
3,750
|
-
|
-
|
|
|
|
44,496
|
11,627
|
15,221
|
Non-current
Liabilities
|
|
|
|
|
|
Financial
instruments
|
|
|
-
|
15
|
9
|
Deferred income
taxes
|
|
|
10,343
|
22,033
|
12,592
|
Deferred share
units
|
|
|
595
|
375
|
388
|
Pension
liability
|
|
|
5,117
|
4,568
|
4,832
|
Long-term
debt
|
|
|
70,878
|
-
|
-
|
Total
Liabilities
|
|
|
131,429
|
38,618
|
33,042
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
Class A and Class B
shares
|
|
|
146,264
|
23,871
|
23,871
|
Contributed
surplus
|
|
|
4,654
|
4,456
|
4,500
|
Accumulated other
comprehensive loss
|
|
|
(434)
|
(366)
|
(495)
|
Retained
earnings
|
|
|
129,654
|
174,004
|
146,579
|
Total
Equity
|
|
|
280,138
|
201,965
|
174,455
|
TOTAL LIABILITIES
AND EQUITY
|
|
|
$
411,567
|
$
240,583
|
$
207,497
|
|
|
|
|
|
|
|
|
AKITA Drilling
Ltd.
|
|
|
|
|
|
|
|
Interim Statements
of Net Loss and Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
$ Thousands except
per share amounts
|
|
|
2018
|
2017
|
2018
|
2017
|
|
|
|
|
|
|
|
REVENUE
|
|
|
$
|
22,465
|
$
|
14,908
|
$
|
66,847
|
$
|
52,087
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES
|
|
|
|
|
|
|
Operating and
maintenance
|
|
|
18,846
|
11,806
|
51,323
|
44,172
|
Depreciation and
amortization
|
|
|
6,008
|
6,550
|
17,421
|
21,020
|
Selling and
administrative
|
|
|
6,872
|
2,861
|
15,433
|
10,249
|
Total Costs and
Expenses
|
|
|
31,726
|
21,217
|
84,177
|
75,441
|
|
|
|
|
|
|
|
Revenue Less Costs
and Expenses
|
|
|
(9,261)
|
(6,309)
|
(17,330)
|
(23,354)
|
|
|
|
|
|
|
|
EQUITY INCOME FROM
JOINT VENTURES
|
|
|
2,426
|
1,081
|
4,987
|
4,992
|
|
|
|
|
|
|
|
OTHER INCOME
(LOSS)
|
|
|
|
|
|
|
Interest
income
|
|
|
25
|
111
|
65
|
342
|
Interest
expense
|
|
|
(272)
|
(42)
|
(441)
|
(126)
|
Gain on sale of
assets
|
|
|
1
|
20
|
24
|
160
|
Net other gains
(losses)
|
|
|
(54)
|
37
|
117
|
76
|
Total Other Income
(Loss)
|
|
|
(300)
|
126
|
(235)
|
452
|
|
|
|
|
|
|
|
Loss Before Income
Taxes
|
|
|
(7,135)
|
(5,102)
|
(12,578)
|
(17,910)
|
|
|
|
|
|
|
|
Income tax
recovery
|
|
|
(1,676)
|
(1,291)
|
(2,249)
|
(4,633)
|
|
|
|
|
|
|
|
NET LOSS FOR THE
PERIOD ATTRIBUTABLE TO SHAREHOLDERS
|
|
|
(5,459)
|
(3,811)
|
(10,329)
|
(13,277)
|
Other comprehensive
income
|
|
|
-
|
-
|
61
|
-
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
FOR THE PERIOD ATTRIBUTABLE TO
SHAREHOLDERS
|
|
|
$
|
(5,459)
|
$
|
(3,811)
|
$
|
(10,268)
|
$
|
(13,277)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS PER CLASS
A AND CLASS B SHARE
|
|
|
|
|
|
|
Basic
|
|
|
$
|
(0.24)
|
$
|
(0.21)
|
$
|
(0.53)
|
$
|
(0.74)
|
Diluted
|
|
|
$
|
(0.24)
|
$
|
(0.21)
|
$
|
(0.53)
|
$
|
(0.74)
|
|
|
|
|
|
|
|
|
|
|
|
AKITA Drilling
Ltd.
|
|
|
|
|
|
|
Interim Statements
of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
Three Months
Ended September 30
|
Nine Months
Ended September 30
|
$
Thousands
|
|
|
2018
|
2017
|
2018
|
2017
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
Net loss and
comprehensive loss
|
|
|
$
|
(5,459)
|
$
|
(3,811)
|
$
|
(10,329)
|
$
|
(13,277)
|
Non-cash items
included in net loss:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
6,008
|
6,550
|
17,421
|
21,020
|
Deferred income tax
expense (recovery)
|
|
|
(1,676)
|
(1,375)
|
(2,249)
|
(1,669)
|
Defined benefit
pension plan expense
|
|
|
117
|
112
|
351
|
337
|
Stock options and
deferred share units expense
|
|
|
375
|
23
|
359
|
324
|
Gain on sale of
assets
|
|
|
(1)
|
(20)
|
(24)
|
(160)
|
Unrealized gain on
financial guarantee contracts
|
|
|
(1)
|
(7)
|
(9)
|
(26)
|
Funds flow from (used
in) operations
|
|
|
(637)
|
1,472
|
5,520
|
6,549
|
Change in non-cash
working capital
|
|
|
(7,337)
|
(1,751)
|
1,873
|
6,985
|
Equity income from
joint ventures
|
|
|
(2,426)
|
(1,081)
|
(4,987)
|
(4,992)
|
Post-employment
benefits
|
|
|
(22)
|
(24)
|
(66)
|
(72)
|
Interest
paid
|
|
|
337
|
-
|
254
|
-
|
Current income tax
expense (recovery)
|
|
|
-
|
84
|
-
|
(2,964)
|
Income taxes
recoverable
|
|
|
2,657
|
2,270
|
2,657
|
2,269
|
Net Cash From
(Used In) Operating Activities
|
|
|
(7,428)
|
970
|
5,251
|
7,775
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
Net cash
consideration for Xtreme shares
|
|
|
(43,852)
|
-
|
(43,852)
|
-
|
Capital
expenditures
|
|
|
(6,057)
|
(4,577)
|
(10,062)
|
(16,779)
|
Change in non-cash
working capital related to capital
|
|
|
2,434
|
883
|
(1,023)
|
(1,098)
|
Distributions from
investments in joint ventures
|
|
|
2,182
|
935
|
5,808
|
3,885
|
Change in cash
restricted for loan guarantees
|
|
|
375
|
363
|
1,113
|
1,079
|
Proceeds on sale of
assets
|
|
|
-
|
20
|
23
|
188
|
Net Cash Used In
Investing Activities
|
|
|
(44,918)
|
(2,376)
|
(47,993)
|
(12,725)
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
Change in long-term
debt
|
|
|
59,793
|
-
|
59,793
|
-
|
Dividends
paid
|
|
|
(1,525)
|
(1,525)
|
(4,575)
|
(4,575)
|
Loan commitment
fee
|
|
|
(761)
|
-
|
(836)
|
(50)
|
Net Cash From
(Used In) Financing Activities
|
|
|
57,507
|
(1,525)
|
54,382
|
(4,625)
|
|
|
|
|
|
|
|
Foreign Currency
Translation
|
|
|
-
|
-
|
61
|
-
|
|
|
|
|
|
|
|
Increase
(Decrease) In Cash and Cash Equivalents
|
|
5,161
|
(2,931)
|
11,701
|
(9,575)
|
Cash and cash
equivalents, beginning of period
|
|
|
7,100
|
7,606
|
560
|
14,250
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
|
$
|
12,261
|
$
|
4,675
|
$
|
12,261
|
$
|
4,675
|
SOURCE AKITA Drilling Ltd.