Trinidad Drilling Ltd. reports solid first quarter 2014 results; stable dayrates and operating margins in existing business, growing international momentum

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

TSX SYMBOL:  TDG

CALGARY, May 7, 2014 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or the "Company") reported solid first quarter 2014 results; with stable dayrates(1) and operating margins in its Canadian and US operations and growing international joint venture momentum.

"The first quarter has been a solid start to what we believe will be an important year for Trinidad," said Lyle Whitmarsh, Trinidad's Chief Executive Officer. "Our existing North American business continues to operate in line with our expectations and we are well positioned to benefit from the improving industry conditions we see happening in the US and that we anticipate in Canada for the second half of 2014. This year is an important year as we transition from a solely North American drilling contractor to a growing international service provider. Our joint venture with Halliburton is progressing well with benefits being recognized by both partners already. We continue to evaluate future expansion opportunities for the joint venture and expect that this will be a significant area of growth for us over the coming years."

(1) See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details.



FINANCIAL HIGHLIGHTS

       
Three months ended March 31,      
($ thousands except share and per share data) 2014 2013 % Change
Revenue  251,505 247,186 1.7
Revenue, net of third party costs 231,018 227,377 1.6
Operating income (1) 95,192 98,359 (3.2)
Operating income percentage (1) 37.8% 39.8% (5.0)
Operating income - net percentage (1) 41.1% 43.3% (5.1)
EBITDA (1) 81,255 82,014 (0.9)
  Per share (diluted) (2) 0.58 0.68 (14.7)
Adjusted EBITDA (1) 79,441 84,836 (6.4)
  Per share (diluted) (2) 0.57 0.70 (18.6)
Cash provided by operations 19,433 40,495 (52.0)
  Per share (basic / diluted) (2) 0.14 0.34 (58.8)
Funds provided by operations (1) 60,857 64,943 (6.3)
  Per share (basic / diluted) (2) 0.44 0.54 (18.5)
Net earnings 25,762 32,748 (21.3)
  Per share (basic / diluted) (2) 0.19 0.27 (29.6)
Adjusted net earnings (1) 27,746 35,573 (22.0)
  Per share (basic / diluted) (2) 0.20 0.29 (31.0)
Capital expenditures  31,206 17,337 80.0
Dividends declared 6,908 6,043 14.3
Shares outstanding - diluted      
  (weighted average) (2)   138,899,380 120,859,476 14.9
As at March 31, December 31,  
($ thousands except percentage data) 2014 2013  % Change
Total assets 1,930,989 1,827,496 5.7
Total long-term liabilities 597,006 564,095 5.8

 

(1) Readers are cautioned that Operating income, Operating income percentage, Operating income - net percentage, EBITDA, Adjusted EBITDA, Funds provided by operations, Adjusted net earnings and the related per share information do not have standardized meanings prescribed by IFRS - see "Non-GAAP Measures" and "Additional GAAP Measures".
(2)  Basic shares include the weighted average number of shares outstanding over the period. Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, of the number of shares issuable pursuant to the Incentive Option Plan.

OPERATING HIGHLIGHTS

       
Three months ended March 31,      
    2014 2013 % Change
Land Drilling Market       
Operating days (1)      
   Canada  4,077 4,198 (2.9)
   United States and International 4,311 4,453 (3.2)
Rate per operating day (1)      
   Canada (CDN$) 25,415 25,401 0.1
   United States and International (CDN$) 24,630 22,416 9.9
   United States and International (US$) 22,641 22,487 0.7
Utilization rate - operating day (1)      
   Canada  74% 79% (6.0)
   United States and International 76% 72% 5.9
Number of drilling rigs at period end      
   Canada  61 60 1.7
   United States and International 61 68 (10.3)
   Coring and surface casing rigs (2) - 15 -
Barge Drilling Market       
   Operating days (1) 244 415 (41.3)
   Rate per operating day (CDN$) (1) 37,815 29,097 30.0
   Rate per operating day (US$) (1) 34,767 29,158 19.2
   Utilization rate - operating day (1) 54% 92% (41.1)
   Number of barge drilling rigs at period end 2 2 -
   Number of barge drilling rigs under Bareboat      
  Charter Agreements at period end 3 3 -
Joint Venture Operations (3)      
  Number of drilling rigs at period end 3 - -

(1)  See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details.
(2)  In the third quarter of 2013, Trinidad disposed of its 15 remaining coring rigs and all related equipment.
(3)  Trinidad is party to a joint venture with a wholly-owned subsidiary of Halliburton. These rigs are owned by the joint venture.

OVERVIEW

Trinidad recorded solid results in the first quarter of 2014, with stable dayrates and operating margins in the Company's drilling operations and growing momentum in its international joint venture, despite the absence of the coring rigs that were sold in 2013.

During the quarter, commodity prices increased from the same quarter in 2013 and the fourth quarter of 2013, improving sentiment within the industry and increasing oil and gas producers' ability to generate higher cash flow. Crude oil prices improved for both the US-based WTI benchmark and the Western Canadian Select benchmark prices, driving an ongoing focus towards crude oil and natural gas liquids targets. Colder-than-usual weather across North America and lower storage levels led to strong gains in natural gas pricing from the previous quarter and the same period last year. Despite these significantly higher natural gas prices, the industry did not demonstrate a trend of increased natural gas drilling, choosing rather to stay with their existing targets and collect increased cash flow from associated natural gas production.

In the first quarter of 2014, Canadian industry activity levels averaged 58%, unchanged from the same quarter last year and up from 43% in the previous quarter due to seasonality. In the US, industry activity increased in the quarter, averaging 1,705 active rigs, up 1.1% from the same quarter last year and 1.5% from the previous quarter. The US industry began to show signs of improvement with increased activity in the first quarter, a trend that has continued to date into the second quarter of 2014.

During the first quarter of 2014, the US dollar strengthened against the Canadian dollar. USD/CDN dollar exchange rates averaged 1.0882 in the quarter compared to 0.9971 in the same quarter last year and 1.0400 in the previous quarter. Trinidad has a significant portion of its business that operates in US dollars and the change in foreign exchange rates in the quarter had a noticeable, and largely positive impact on the Company's results. The stronger US dollar positively impacted EBITDA generated by Trinidad's US and international division but also drove increased depreciation and interest expenses in the quarter. In addition, the value of the Company's senior note increased solely as a result of the impact of foreign exchange in the quarter.

INDUSTRY STATISTICS

                     
  2014 Full Year   2013 Full Year 2012
  Q1 2013 Q4 Q3 Q2 Q1 2012 Q4 Q3 Q2
Commodity Prices                     
Aeco natural gas price (CDN$ per gigajoule) 5.34 3.01 3.33 2.32 3.36 3.03 2.26 3.03 2.18 1.81
Henry Hub natural gas price (US$ per mmBtu) 5.15 3.72 3.84 3.55 4.01 3.47 2.75 3.40 2.88 2.29
Western Canada Select crude oil price                     
  (CDN$ per barrel) 85.81 75.84 69.62 86.31 79.25 67.64 71.70 60.73 76.29 74.10
WTI crude oil price (US$ per barrel) 98.72 98.01 97.56 105.82 94.14 94.30 94.09 88.17 92.15 93.30
                      
US Activity                     
Average industry active land rig count (1) 1,705 1,685 1,679 1,687 1,686 1,687 1,852 1,741 1,837 1,902
Average Trinidad active land rig count (2) 48 50 49 51 50 49 57 56 55 58
                     
Canadian Activity                     
Average industry utilization (3) 58% 40% 43% 37% 18% 58% 39% 36% 42% 18%
Average Trinidad utilization (4) 68% 48% 48% 50% 24% 73% 52% 51% 58% 24%
(1)  Baker Hughes rig counts (information obtained from Tudor Pickering Holt & Company weekly rig roundup report).
(2)  Includes US and international rigs.
(3)  Canadian Association of Oilwell drilling Contractors (CAODC) utilization.
(4)  Based on drilling days (spud to rig release dates).



FIRST QUARTER 2014 HIGHLIGHTS

  • Trinidad generated revenue of $251.5 million in the first quarter of 2014, up $4.3 million and 1.7% from the same quarter in 2013. Revenue increased in the current period as a result of a higher level of external rig manufacturing and a positive foreign currency translation from Trinidad's US division; partly offset by the absence of the Company's coring rigs, lower activity from the Mexican rigs and a weaker contribution from the barge operations.

  • Overall operating income - net percentage decreased from 43.3% in the first quarter of 2013 to 41.1% in the current quarter. Profitability in Trinidad's drilling operations remained stable compared to the same quarter last year with operating income - net percentage for the Company's Canadian and US and international operations largely unchanged at 48.0% and 38.2%, respectively. Operating income - net percentage for the Manufacturing segment increased to 8.6% in the current quarter due to a higher level of external new builds in 2014. Overall, the manufacturing division typically generates lower margins than Trinidad's drilling operations as the external new builds are constructed for Trinidad's joint venture company and joint venture partner. An increased contribution from the manufacturing operations in 2014 caused overall profitability to decline.

  • Adjusted EBITDA was $79.4 million in the quarter, down 6.4% from the same quarter last year. Adjusted EBITDA decreased in the quarter largely as a result of a decrease in operating income. This was partially offset by a favorable foreign exchange translation on Trinidad's US and international operations, as the US dollar strengthened against the Canadian dollar in the period.

  • Net earnings in the quarter were $25.8 million or $0.19 per share (diluted), down 21.3% from the same quarter last year. Net earnings decreased largely as a result of a lower operating income in the current year, higher general and administration costs, a foreign exchange loss recorded in 2014 and larger deferred income taxes; offset slightly by a gain on sale in 2014 on three rigs sold to the joint venture.

  • Adjusted net earnings decreased by $7.8 million in the quarter compared to the same quarter last year, with adjusted net earnings per share (diluted) decreasing $0.09 per share. Adjusted net earnings decreased in the current year due to lower adjusted EBITDA, and higher income tax expenses in the current period.

  • During the first quarter, Trinidad made progress on its joint venture with Halliburton, selling three upgraded US rigs to the joint venture and transporting them to Saudi Arabia. In addition, Trinidad added a new area of operation for the joint venture during the quarter, agreeing to build four new rigs for operation in Mexico. All of the joint venture rigs will be operating under three year, take-or-pay contracts, with a one year optional extension by the customer.

RESULTS FROM OPERATIONS

Canadian Operations

             
Three months ended March 31,            
($ thousands except percentage and operating data)   2014   2013 (4)   % Change
Operating revenue (1)   103,607   115,442   (10.3)
Other revenue   722   44   1,540.9
    104,329   115,486   (9.7)
Operating costs (1)   54,300   59,591   (8.9)
Operating income (3)   50,029   55,895   (10.5)
Operating income - net percentage (3)   48.0%   48.4%    
             
Operating days (3)   4,077   4,198   (2.9)
Drilling days (3)   3,713   3,864   (3.9)
Rate per operating day (CDN$) (3)   25,415   25,401   0.1
Utilization rate - operating day (3)   74%   79%   (6.0)
Utilization rate - drilling day (3)   68%   73%   (7.3)
CAODC industry average (2)   58%   58%   -
             
Number of drilling rigs at period end   61   60   1.7
Number of coring and surface rigs            
  at period end    -   15   -
(1)  Operating revenue and operating costs for the three months ended March 31, 2014 and 2013 exclude third party recovery and third party costs of $14.5 million and $13.7 million, respectively.
(2)  CAODC industry average is based on drilling days divided by total days available.
(3) See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details.
(4) During the prior year, Trinidad's Canadian operations included the Canadian manufacturing division. Effective January 1, 2014, Trinidad has re-evaluated operating segments. Management has determined that the Manufacturing operations is considered a separate operating segment. All prior period segmented information has been reclassified to conform to this new presentation.

In the first quarter of 2014, Trinidad's Canadian operations generated $11.8 million or 10.3% less operating revenue when compared to the same quarter last year. Operating revenue lowered largely as a result of the sale of Trinidad's preset and coring rigs in the third quarter of 2013; these rigs generated $8.8 million in operating revenue in the first quarter of 2013 compared to nil in the current period. The preset and coring rigs, including related inventory, were sold in the third quarter of 2013 for $12.0 million.

In addition, the segment's drilling rigs recorded 121 less operating days than the same quarter last year, negatively impacting operating revenue in the current period. The lower operating days were mainly driven by weaker customer demand in the oilsands sector, reducing activity for the company's lower specification equipment. While activity was lower quarter over quarter, Trinidad's high performance, modern fleet continued to outperform industry activity levels, recording utilization levels that exceeded the industry average by ten percentage points for 2014. This is a reflection of the Company's strategic focus towards in-demand, high performance equipment backed by a strong customer base and long-term contracts. Dayrates in the current period were largely unchanged from the same quarter last year.

Operating income - net percentage declined slightly in the current period when compared to the prior year, due to weaker customer demand in the oil sands sector combined with increased labor costs related to a crew wage increase that occurred in the second half of 2013. The lower customer demand in the oil sand sector reduced activity levels and negatively impacted margins. In addition, the crew wage increase in the third quarter of the prior year, which is passed on to operators at cost, reduced profitability as a percentage of revenue in the quarter.

During the current quarter, Trinidad's active rig fleet increased by one rig when compared to March 31, 2013; one rig was delivered in the third quarter of 2013. This rig was constructed by the Company's Manufacturing operations and was put into service in the Duvernay shale under a long-term, take-or-pay contract.

First quarter 2014 versus fourth quarter 2013

Compared to the fourth quarter of 2013, revenue and operating income increased by $30.4 million and $16.7 million, respectively, in the first quarter of 2014. The increase is mainly due to the seasonal nature of the Canadian drilling division as the winter drilling season is typically a more active period. Additionally, dayrates increased in the current period by $313 per day mainly due to the demand for additional equipment on active rigs during the winter drilling season. Operating income - net percentage also increased to 48.0% compared to 45.1% in the fourth quarter of 2013 due to stronger revenue generation based on the increased number of operating days and the increased dayrate in the current period.

United States and International Operations

             
Three months ended March 31,            
($ thousands except percentage and operating data)   2014   2013 (3)   % Change
Operating revenue (1)   114,781   111,575   2.9
Other revenue   46   22   109.1
    114,827   111,597   2.9
Operating costs (1)   70,972   69,014   2.8
Operating income (1)   43,855   42,583   3.0
Operating income - net percentage (2)   38.2%   38.2%    
             
 Land Drilling Rigs             
Operating days (2)   4,311   4,453   (3.2)
Drilling days (2)   3,727   3,823   (2.5)
Rate per operating day (CDN$) (2)   24,630   22,416   9.9
Rate per operating day (US$) (2)   22,641   22,487   0.7
Utilization rate - operating day (2)   76%   72%   5.9
Utilization rate - drilling day (2)   66%   62%   6.3
Number of drilling rigs at period end   61   68   (10.3)
             
 Barge Drilling Rigs             
Operating days (2)   244   415   (41.3)
Rate per operating day (CDN$) (2)   37,815   29,097   30.0
Rate per operating day (US$) (2)   34,767   29,158   19.2
Utilization rate - operating day (2)   54%   92%   (41.1)
Number of barge drilling rigs at period end    2   2   -
Number of barge drilling rigs under             
      Bareboat Charter Agreements at period end    3   3   -
(1) Operating revenue and operating costs for the three months ended March 31, 2014 and 2013 exclude third party recovery and third party costs of $5.7 million and $6.1 million, respectively.
(2) See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details.
(3) During the prior year, Trinidad's US and international operations included the US manufacturing division. Effective January 1, 2014, Trinidad has re-evaluated operating segments. Management has determined that the Manufacturing operations is considered a separate operating segment. All prior period segmented information has been reclassified to conform to this new presentation.

In the first quarter of 2014, Trinidad's US and international segment recorded operating revenue of $114.8 million, up 2.9% from the same quarter last year. Operating revenue increased in the quarter due to improved dayrates and a stronger US dollar, partially offset by lower operating days and a weaker contribution from the Company's barge operations.

Dayrates in the current quarter increased by US$154 per day compared to the same quarter last year. Dayrates increased as a result of early termination revenue and standby revenue received in the quarter. This standby and early termination revenue increased the dayrate in the first quarter by US$1,713 per day, compared to US$665 per day in the same period in 2013. Early termination revenue was received on two rigs during the quarter. Both of these rigs have subsequently been put back to work with a new customer under long-term contracts. Higher US dollar dayrates combined with a stronger USD/CDN exchange rate in 2014 caused dayrates, when converted to Canadian dollars, to increase by CDN$2,214 per day compared to the same quarter last year.

Operating days decreased by 142 days quarter over quarter as a result of three Mexican rigs that were idle in the current quarter. Excluding the impact of these rigs, the US land drilling division recorded an increase in operating days in the quarter.

The three rigs Trinidad has in Mexico completed their contracts at the end of the second quarter of 2013 and were idle during most of the second half of 2013 and into 2014, negatively impacting utilization and revenue generation in the current year. Trinidad is currently pursuing future opportunities for these rigs and expects to redeploy them to Canada where they are expected to return to work in the second half of 2014.

For the three months ended March 31, 2014, Trinidad's active rig count decreased by seven rigs when compared to the prior year. Four rigs were removed from Trinidad's active rig count at December 31, 2013, due to these rigs not meeting customer requirements in the current drilling environment. Additionally, three rigs were sold to Trinidad's joint venture in the first quarter of 2014.

Operating income - net percentage remained consistent at 38.2% quarter over quarter. Early termination and standby revenues in the US land drilling division, offset by decreased profitability in the Company's barge division and Mexico rigs led to overall stable profitability.

Trinidad's barge drilling rigs continued to demand a strong dayrate in the current year, showing an increase of US$5,609 per day in 2014 compared to the prior year. However, a decline in operating days in the current period caused overall revenue generation and profitability to decline. Drilling projects that were expected to take place in the first quarter were pushed back to later periods, causing downtime in the current quarter on these rigs. Trinidad anticipates that activity levels will return to previous levels in the coming quarters.

First quarter 2014 versus fourth quarter 2013

Compared to the fourth quarter of 2013, revenue and operating income decreased by $21.2 million and $21.6 million, respectively, in the first quarter of 2014. The decrease in the current period was due to lower early termination and standby revenues received in 2014 as well as a decrease in overall operating days in the current period. In the fourth quarter of 2013, Trinidad recorded US$25.4 million of early termination and standby revenue, compared to US$7.4 million received in 2014. Additionally, a decrease of 159 operating days in the current period has also negatively affected revenue generation in the period.

Operations in the current period were also negatively impacted by the decline in operations of Trinidad's barge drilling rigs, which had operating days and utilization of 244 days and 54%, respectively, in the first quarter of 2014 compared to 394 days and 86% in the fourth quarter of 2013.

Joint Venture Operations

Summarized statement of operations and comprehensive loss for Trinidad Drilling International (TDI):

             
For the three months ended March 31, 2014      TDI    Trinidad
($ thousands)      ownership    ownership
        percentage   percentage
        100%   60%
Revenue          
Oilfield service revenue     3,316   1,990
        3,316   1,990
Expenses          
Operating expenses     2,074   1,244
General and administrative expenses     1,466   880
Foreign exchange     (6)   (4)
Loss     (218)   (131)

 

During 2013, Trinidad signed a joint venture agreement with Halliburton with a right of first look at all drilling projects outside of Canada and the United States. The joint venture is expected to concentrate initially on Saudi Arabia and Mexico, with future growth opportunities in other international markets. The joint venture will conduct business under the name Trinidad Drilling International (TDI) through separately incorporated entities.

Trinidad owns 60% of the shares of TDI, and each of Trinidad and Halliburton have equal voting rights with respect to the operations of the company. TDI is accounted for using the equity method of accounting, whereby Trinidad takes 60% of the net income recorded as loss (gain) from investment in joint venture.

During the three months ended March 31, 2014, TDI took ownership of the three upgraded rigs purchased from Trinidad's US land drilling division. These rigs have not been put into service as of the quarter end; however, they did collect standby revenue, which accounts for the entire revenue balance earned in the quarter. Drilling operations are expected to commence early in the second quarter in Saudi Arabia.

Rig Purchase Commitments

During 2013, TDI agreed to purchase four rigs from Trinidad for operations in Saudi Arabia, three upgraded rigs from Trinidad's US operations and one new build rig constructed by Trinidad's manufacturing division. As of March 31, 2014, TDI has taken ownership of the three upgraded rigs, with the new build rig expected to be completed in the second half of 2014. All four rigs will be operating under three-year, take-or-pay contracts with an optional one year extension.

Additionally, early in 2014, TDI agreed to purchase four rigs from Trinidad's manufacturing division for operations in Mexico. Each of these rigs will be high performance, 3,600 horsepower, AC, walking rigs, operating under three-year, take-or-pay contracts with an optional one year extension. These rigs are expected to be delivered towards the end of 2014 and early 2015.

Manufacturing Operations

             
Three months ended March 31,            
($ thousands except percentage and operating data)   2014   2013   % Change
Operating revenue (2)   11,854   294   3,931.9
Other revenue   8   -   -
    11,862   294   3,934.6
Operating costs (2)   10,836   413   2,523.7
Operating income (1)   1,026   (119)   962.1
Operating income - net percentage (1)   8.6%   -40.5%    
(1) See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this MD&A for further details.
(2) For the three months ended March 31, 2014, included in operating revenue and operating costs are downstream elimination entries of $7.6 million and $6.9 million, respectively (2013, nil and nil, respectively). These entries remove Trinidad's percentage of profits related to manufacturing of rigs for the joint venture.

Effective January 1, 2014, Trinidad reviewed all existing operating segments in order to better present the Company's operations based on geographic location, services provided and any material changes to operations. In the prior year, Trinidad's manufacturing operations mainly performed work internally; therefore, the prior year operating income includes a loss based on costs incurred by the manufacturing division mainly related to raw materials consumed during construction of rigs for internal use. Towards the end of 2013 and early 2014, Trinidad's manufacturing division signed contracts to build rigs for external parties, including the Company's joint venture partner and the joint venture company.

As the manufacturing operations begins to record operating revenues and costs, management believes that presenting this division as a separate operating segment from the Company's drilling operations is more useful to users as it will provide a more accurate representation of the margins recorded on Trinidad's drilling operations. Prior period segmented information has been reclassified to conform to the current period's presentation.

The purpose of the manufacturing operations is to support rig builds and rig maintenance for all of Trinidad's divisions, including all associates and joint ventures. All contracts are based on a cost plus formula which is calculated in order for Trinidad to break even on rig builds when all costs, including general and administrative expenses, are factored in. Contracts are negotiated depending on the Company's varying involvement, which can range from full scale design and manufacturing to project management with a large degree of outsourcing.

Towards the end of 2013 and into 2014, Trinidad signed five new build contracts. One rig for the joint venture to operate in Saudi Arabia and four rigs for the joint venture to operate in Mexico. Additionally, Trinidad has agreed to build a training rig for their joint venture partner. For the period ended March 31, 2014, Trinidad recognized revenues and expenses related to the one Saudi rig build and the training rig, compared to no external new build revenues or expenses recognized in 2013. Additionally, as of March 31, 2014, Trinidad is still early in the construction phase of the four Mexico rigs. Long-lead items have been ordered, but assembly has not occurred as yet. Therefore, there is no related revenue or expenses included in Trinidad's operating income related to the construction of these rigs.

Delivery of the Saudi rig is expected in the second half of 2014, the training rig is expected to be delivered towards the end of 2014 and delivery of the four Mexico rigs is expected towards the end of 2014 and early 2015.

QUARTERLY ANALYSIS
FINANCIAL HIGHLIGHTS - QUARTERLY ANALYSIS

                 
   2014  2013 2012
($ millions except per share data and operating data)  Q1   Q4   Q3  Q2   Q1   Q4   Q3   Q2 
Revenue 251.5 224.6 208.7 165.4 247.2 209.6 215.1 174.3
Operating income (1) 95.2 99.6 76.2 55.7 98.4 77.8 80.6 66.4
Operating income percentage (1) 37.8% 44.4% 36.5% 33.6% 39.8% 37.1% 37.5% 38.1%
Operating income - net percentage (1) 41.1% 47.0% 38.5% 35.6% 43.3% 39.7% 40.0% 40.0%
Net earnings (loss) 25.8 28.8 9.2 0.3 32.7 (12.4) 20.0 12.9
Adjustments for:                
 Depreciation and amortization  30.2 29.5 30.1 27.6 29.9 29.2 30.4 25.8
 Foreign exchange  3.1 0.9 0.4 - - (1.4) 0.8 (0.7)
 (Gain) loss on sale of property and equipment  (10.5) 0.1 (0.1) 1.3 - (11.5) - (0.5)
 Impairment of property and equipment  - - - 0.1 - 70.1 1.3 -
 Loss from investment in Joint Venture  0.1 0.8 - - - - - -
 Finance costs  10.0 12.0 10.4 10.0 10.0 10.1 10.3 10.5
 Income taxes  15.3 11.1 5.9 (1.6) 9.4 (22.2) 2.7 4.4
 Interest Income  (0.2) (0.1) - - - - - -
 Other  5.6 1.5 5.9 2.2 2.8 1.4 2.9 1.0
 Income taxes paid  (0.4) (1.8) - (0.8) (1.3) (2.0) (1.1) (0.7)
 Income taxes recovered  0.3 1.5 0.4 0.7 - 0.7 3.9 -
 Interest paid  (18.6) (1.1) (18.4) (0.7) (18.6) (1.1) (19.5) (1.5)
 Interest received  0.2 0.1 - - - - - -
Funds provided by operations (1) 60.9 83.3 43.8 39.1 64.9 60.9 51.7 51.2
Net earnings (loss) per share (diluted) 0.19 0.23 0.08 - 0.27 (0.10) 0.17 0.11
Funds provided by operations per share (diluted) 0.44 0.67 0.36 0.32 0.54 0.50 0.43 0.42
(1) See the Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section of this document for further details.

NON-GAAP MEASURES HIGHLIGHTS - QUARTERLY ANALYSIS

                 
   2014  2013   2012 
 ($ thousands except per share data and operating data)   Q1   Q4   Q3   Q2   Q1   Q4   Q3   Q2 
EBITDA (1) 81,255 81,246 55,635 36,326 82,014 4,825 63,398 53,572
Per share (diluted) (2) 0.58 0.65 0.46 0.30 0.68 0.04 0.52 0.44
Adjusted EBITDA (1) 79,441 83,830 61,838 39,941 84,836 63,332 68,387 53,344
Per share (diluted) (2) 0.57 0.68 0.51 0.33 0.70 0.52 0.57 0.44
Adjusted net earnings (1) 27,746 86,168 54,938 38,730 35,573 103,557 80,132 55,678
Per share (diluted) (2) 0.20 0.69 0.45 0.32 0.29 0.86 0.66 0.46
(1)   See the Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section of this document for further details.
(2)   Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, of the number of shares issuable pursuant to the Incentive Option Plan.

OPERATING HIGHLIGHTS - QUARTERLY ANALYSIS

                   
     2014   2013   2012 
     Q1   Q4   Q3   Q2   Q1   Q4   Q3   Q2 
Land Drilling Market                 
Operating days (1)                
   Canada  4,077 2,935 3,018 1,434 4,198 2,915 3,233 1,288
   United States and International 4,311 4,470 4,733 4,578 4,453 4,789 5,038 5,289
Rate per operating day (1)                
   Canada (CDN$) 25,415 25,102 23,686 25,511 25,401 26,190 23,501 25,343
   United States and International (CDN$) 24,630 27,243 23,297 22,908 22,416 22,305 22,518 22,586
   United States and International (US$) 22,641 26,213 22,460 22,436 22,487 22,589 22,263 22,616
Utilization rate - operating day (1)                
   Canada  74% 52% 54% 26% 79% 56% 62% 26%
   United States and International 76% 71% 76% 73% 72% 77% 81% 86%
Number of drilling rigs at period end                
   Canada  61 61 61 60 60 59 57 55
   United States and International 61 64 68 68 68 68 68 68
   Coring and surface casing rigs - - - 15 15 15 20 20
                   
Barge Drilling Market                 
   Operating days (1) 244 394 449 445 415 386 376 429
   Rate per operating day (CDN$) (1) 37,815 34,810 33,962 31,731 29,097 29,954 30,008 29,072
   Rate per operating day (US$) (1) 34,767 33,490 32,740 31,077 29,158 30,330 29,583 29,106
   Utilization rate - operating day (1) 54% 86% 97% 98% 92% 84% 82% 94%
   Number of barge drilling rigs at period end  2 2 2 2 2 2 2 2
   Number of barge drilling rigs under                 
  Bareboat Charter at period end  3 3 3 3 3 3 3 3
Joint Venture Operations (2)                
  Number of drilling rigs at period end 3 - - - - - - -
(1) See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details
(2)  Trinidad is party to a joint venture with a wholly-owned subsidiary of Halliburton. During the first quarter of 2014, 3 rigs were sold to the joint venture by Trinidad's US and international operations. Effective March 31, 2014, these rigs are owned by the joint venture.

FINANCIAL SUMMARY

Trinidad's total long-term debt balance increased by $19.2 million during the current year when compared to December 31, 2013. This increase was due to the increase in the Senior Notes at March 31, 2014, and is entirely a result of the increase in the US to Canadian dollar exchange rate in 2014 versus the prior year as these notes are held in US funds. The Senior Notes are translated at each period end, as such their value will fluctuate with variations in exchange rates. The Senior Notes are due January 2019 and interest is payable semi-annually in arrears on January 15 and July 15.

As of March 31, 2014 and December 31, 2013, Trinidad's revolving debt facilities were completely paid off, leaving $200.0 million and US$100.0 million unutilized in these facilities, respectively. The Company continues to consider future capital commitments, and as such, the unutilized facilities are expected to be used in the future course of business. The Canadian and US revolving facilities require quarterly interest payments that are based on Bankers Acceptance and LIBOR rates and incorporate a tiered interest rate, which varies depending on the results of the Consolidated Total Debt to Bank EBITDA ratio. The facility matures on December 16, 2017, and is subject to annual extensions of an additional year on each anniversary.

Capital expenditures

         
Three months ended March 31,   2014   2013
New Builds   15,351   12,527
Capital Upgrades & Enhancements   10,800   1,616
Maintenance & Infrastructure   5,055   3,194
Total   31,206   17,337

 

During the three months ended March 31, 2014, a total of $31.2 million was spent on capital expenditures, compared to $17.3 million for the same period in the prior year. These capital expenditures were substantially related to the Company's rig build program for its Canadian operations. As well, Trinidad continued to work on upgrading existing equipment including moving systems, top drives and mud systems, to ensure the Company's rigs remain competitive in the current market.

The costs associated with Trinidad's external new builds are not included in the Company's capital expenditures shown above. These costs are accounted for using the percentage of completion method and are recorded as operating costs included in Trinidad's manufacturing operations.

In 2014, Trinidad expects to spend a total of approximately $315.0 million on capital projects. This total includes Trinidad's internal capital projects, Trinidad's portion of the joint venture capital projects, and takes into account proceeds received for existing rigs sold into the joint venture. Trinidad's capital budget is further broken down as follows:


  • Completion of one new rig to be delivered to Trinidad's Canadian operations for LNG-related drilling;
  • Completion of  one new rig and the upgrading of three existing rigs to be delivered to Saudi Arabia for the joint venture arrangement;
  • Construction of four new rigs to be delivered to Mexico for the joint venture arrangement in late 2014 or early 2015;
  • Upgrades to improve the efficiency and marketability of more than 30 existing rigs; and
  • Maintenance and infrastructure capital.


Excluding proceeds received from the sale of rigs into the joint venture, Trinidad spent $38.1 million on internal capital projects and its portion of the joint venture projects in the first quarter of 2014. Costs related to the joint venture rig build projects are accounted for as operating expenses in Trinidad's manufacturing operations.

As of March 31, 2014, the three upgraded rigs have been delivered to the joint venture, and Trinidad continues work on the remaining new build rigs included in the 2014 capital program.

OUTLOOK

To date in 2014, activity levels have remained firm in North America, with Canadian conditions similar to last year and the US beginning to show increasing activity and dayrates.

In the past 12 months the benefits of modern, high-performance equipment have become more widely acknowledged and customers are increasingly looking for efficient, technically-advanced equipment that can drill deeper and longer-reach horizontal wells. This trend is continuing and expanding into new areas and Trinidad's reputation as a high-performance driller with modern, efficient rigs positions it well for these changing industry conditions.

Natural gas prices have remained stronger to date in 2014 and while they have not yet led to a significant increase in dry gas drilling, the improved pricing on associated gas production improves customers' cash flow and provides the ability to increase capital spending as the year progresses.

Industry conditions in Canada are stable, with upside momentum as oil and gas producers re-evaluate their capital programs under stronger commodity prices. In addition, LNG-related demand is expected to drive increasing activity levels as the projects and their timelines become clearer towards the end of 2014 and into 2015. In the US, conditions continue to improve with activity levels across the country growing and dayrates moving up, particularly for high performance equipment. On the international front, Trinidad's joint venture with Halliburton is progressing well. Trinidad is currently constructing five new rigs that will be sold into the joint venture to operate in Mexico and Saudi Arabia, bringing the total number of rigs in the joint venture to eight. The joint venture is continuing to assess opportunities for expansion and Trinidad expects this to be a strong area of growth in the coming years.

Trinidad has followed a strategic plan over the past few years, positioning the Company well for sustainable growth in today's changing drilling industry. The next step in Trinidad's plan is to successfully transition from its historical North American operations to a growing international drilling contractor. The Company is making good progress on this front while also remaining focused on its existing US and Canadian operations.  Trinidad expects to grow its international business at a measured pace, ensuring operations are well established and running smoothly before adding new operating areas. Trinidad is uniquely positioned with three distinct growth areas (Canada, the US and international), while also having the cash flow and financial flexibility to fund its future growth.

CONFERENCE CALL

A conference call and webcast to discuss the results will be held for the investment community on Thursday May 8th, 2014 beginning at 9:00 a.m. MT (11:00 a.m. ET).  To participate, please dial (888) 231-8191 (toll-free in North America) or (647) 427-7450 approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 12:30 p.m. MT on May 8th, 2014 until midnight May 15th, 2014 by dialing (855) 859 2056 or (416) 849-0833 and entering replay access code 25656531.

A live audio webcast of the conference call will also be available via the Investor Relations page of Trinidad's website.

TRINIDAD DRILLING LTD.

Trinidad is a corporation focused on sustainable growth that trades on the Toronto Stock Exchange under the symbol TDG. Trinidad's divisions operate in the drilling and barge-drilling sectors of the North American oil and natural gas industry with operations in Canada, the United States and Mexico. In addition, through a joint venture, Trinidad has the opportunity to operate drilling rigs in other international markets such as Saudi Arabia and Mexico. Trinidad is focused on providing modern, reliable, expertly designed equipment operated by well-trained and experienced personnel. Trinidad's drilling fleet is one of the most adaptable, technologically advanced and competitive in the industry.

       
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION      
       
As at    March 31,  December 31, 
($ thousands) - unaudited   2014  2013 
       
Assets      
Current Assets      
Cash and cash equivalents   278,069 268,160
Accounts receivable    212,823 166,557
Inventory   19,560 8,474
Prepaid expenses   15,277 5,557
Assets held for sale   3,685 3,685
    529,414 452,433
       
Property and equipment   1,239,834 1,275,465
Intangible assets and goodwill   95,229 91,729
Investment in joint venture   66,512 7,869
    1,930,989 1,827,496
       
Liabilities      
Current Liabilities      
Accounts payable and accrued liabilities    101,245 110,455
Dividends payable   6,908 6,906
Deferred revenue and customer deposits   67,548 31,952
    175,701 149,313
       
Long-term debt   487,894 468,670
Deferred income taxes   109,112 95,425
    772,707 713,408
       
Shareholders' Equity      
Common shares   1,117,637 1,117,197
Contributed surplus   50,664 50,607
Accumulated other comprehensive income   29,247 4,404
Deficit   (39,266) (58,120)
    1,158,282 1,114,088
    1,930,989 1,827,496

 



         
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME         
         
Three months ended March 31,        
($ thousands) - unaudited    2014    2013 
         
Revenue        
Oilfield service revenue   250,447   247,120
Other revenue   1,058   66
    251,505   247,186
         
Expenses         
Operating expense   156,313   148,827
General and administrative   21,191   16,314
Depreciation and amortization   30,255   29,859
Foreign exchange    3,154   (5)
(Gain) loss on sale of property and equipment   (10,539)   36
    200,374   195,031
         
Loss from investment in joint venture   131   -
Finance costs   9,959   9,970
Earnings before income taxes   41,041   42,185
         
Income taxes         
Current   290   1,071
Deferred    14,989   8,366
    15,279   9,437
Net earnings   25,762   32,748
         
Other comprehensive income         
Foreign currency translation adjustment,        
     net of income tax   24,843   6,683
    24,843   6,683
Total comprehensive income   50,605   39,431
Earnings per share        
Net earnings        
     Basic / Diluted   0.19   0.27

 




                     
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY                    
For three months ended March 31, 2014 and 2013                    
            Accumulated        
            other        
     Common   Contribued   comprehensive       Total
($ thousands) - unaudited    shares   surplus   income (1)   (Deficit)   equity
  Balance at December 31, 2013    1,117,197   50,607   4,404   (58,120)   1,114,088
  Exercise of stock options    440   (117)   -   -   323
  Share-based payments    -   174   -   -   174
  Total comprehensive income   -   -   24,843   25,762   50,605
  Dividends    -   -   -   (6,908)   (6,908)
  Balance at March 31, 2014    1,117,637   50,664   29,247   (39,266)   1,158,282
                     
  Balance at December 31, 2012    952,043   50,245   (34,403)   (104,036)   863,849
  Stock-based compensation    -   170   -   -   170
  Total comprehensive income (loss)    -   -   6,683   32,748   39,431
  Dividends    -   -   -   (6,043)   (6,043)
  Balance at March 31, 2013    952,043   50,415   (27,720)   (77,331)   897,407

(1) Accumulated other comprehensive income (loss) consisted of the foreign currency translation adjustment.
  All amounts will be reclassified to profit or loss when specific conditions are met.

         
CONSOLIDATED STATEMENTS OF CASH FLOWS      
         
For three months ended March 31,      
($ thousands) - unaudited   2014  2013 
         
Cash provided by (used in)      
Operating activities      
Net earnings   25,762 32,748
Adjustments for:      
  Depreciation and amortization   30,255 29,859
  Foreign exchange   3,154 (5)
  (Gain) loss on sale of property and equipment   (10,539) 36
  Loss from investment in joint venture   131 -
  Finance costs   9,959 9,970
  Income taxes   15,279 9,437
  Interest income   (180) (3)
  Other (1)   5,575 2,791
  Income taxes paid   (400) (1,314)
  Income taxes recovered   310 -
  Interest paid   (18,629) (18,579)
  Interest received   180 3
Funds provided by operations   60,857 64,943
Change in non-cash operating working capital   (41,424) (24,448)
Cash provided by operations   19,433 40,495
         
Investing activities      
Purchase of property and equipment   (31,206) (17,337)
Proceeds from disposition of property and equipment   88,397 461
Investment in joint venture   (73,856) -
Change in non-cash working capital   8,562 7,275
Cash used by investing   (8,103) (9,601)
         
Financing activities      
Proceeds from long-term debt   - 10,949
Repayments of long-term debt   - (29,138)
Proceeds from exercise of options   323 -
Dividends paid   (6,906) (6,043)
Cash used by financing   (6,583) (24,232)
         
Cash flow from operating, investing and financing activities   4,747 6,662
Effect of translation of foreign currency cash   5,162 197
Increase in cash for the period   9,909 6,859
         
Cash and cash equivalents - beginning of period   268,160 4,933
Cash and cash equivalents - end of period   278,069 11,792

(1) Other includes share-based payment expense.



SEGMENTED INFORMATION

The following presents the result of Trinidad's operating segments:

                             
For three months ended       United States /                    
March 31, 2014   Canadian   International   Manufacturing   Joint Venture   Inter-segment        
($ thousands)   Operations   Operations   Operations   Operations (1)   Eliminations   Corporate   Total
                             
Operating revenue   103,607   114,781   19,478   -   -   -   237,866
Other revenue   722   46   8   -   -   -   776
Third party recovery   14,522   5,683   -   -   -   -   20,205
General and administrative - third party recovery   -   -   -   -   -   282   282
Inter-segment revenue   -   -   9,913   -   (9,913)   -   -
Elimination of downstream transactions   -   -   (7,624)   -   -   -   (7,624)
    118,851   120,510   21,775   -   (9,913)   282   251,505
Operating   54,300   70,972   17,766   -   -   -   143,038
Third party costs   14,522   5,683   -   -   -   -   20,205
Inter-segment operating   -   -   9,913   -   (9,913)   -   -
Elimination of downstream transactions   -   -   (6,930)   -   -   -   (6,930)
Operating income   50,029   43,855   1,026   -   -   282   95,192
Depreciation and amortization   11,860   17,980   415   -   -   -   30,255
Gain on sale of assets   (261)   (25,656)   -   -   -   -   (25,917)
Elimination of downstream transactions   -   15,378   -   -   -   -   15,378
    11,599   7,702   415   -   -   -   19,716
Segmented income (loss)   38,430   36,153   611   -   -   282   75,476
Joint venture loss   -   -   -   131   -   -   131
General and administrative   -   -   -   -   -   20,909   20,909
General and administrative - third party costs   -   -   -   -   -   282   282
Foreign exchange   -   -   -   -   -   3,154   3,154
Finance costs   -   -   -   -   -   9,959   9,959
Income taxes   -   -   -   -   -   15,279   15,279
Net earnings (loss)   38,430   36,153   611   (131)   -   (49,301)   25,762
                             
Purchase of property and equipment   13,037   18,105   64   -   -   -   31,206
 
(1) The joint venture is recorded using the equity method of accounting. The Company's share of individual assets and liabilities are recognized as an investment on the consolidated statements of financial position, and revenues and expense are recognized with net earnings as a (gain) loss from investment in joint venture on the consolidated statements of operations and comprehensive income.
                             
                             
For three months ended       United States /                    
March 31, 2013   Canadian   International   Manufacturing   Joint Venture   Inter-segment        
($ thousands)   Operations   Operations   Operations   Operations (1)   Eliminations   Corporate   Total
                             
Operating revenue   115,442   111,575   294   -   -   -   227,311
Other revenue   44   22   -   -   -   -   66
Third party recovery   13,701   6,108   -   -   -   -   19,809
General and administrative - third party recovery   -   -   -   -   -   -   -
Inter-segment revenue   -   -   11,362   -   (11,362)   -   -
Elimination of downstream transactions   -   -   -   -   -   -   -
    129,187   117,705   11,656   -   (11,362)   -   247,186
Operating   59,591   69,014   413   -   -   -   129,018
Third party costs   13,701   6,108   -   -   -   -   19,809
Inter-segment operating   -   -   11,362   -   (11,362)   -   -
Elimination of downstream transactions   -   -   -   -   -   -   -
Operating income   55,895   42,583   (119)   -   -   -   98,359
Depreciation and amortization   11,433   17,915   511   -   -   -   29,859
Loss (gain) on sale of assets   141   (105)   -   -   -   -   36  
Elimination of downstream transactions   -   -   -   -   -   -   -
    11,574   17,810   511   -   -   -   29,895
Segmented income (loss)   44,321   24,773   (630)   -   -   -   68,464
Joint venture (gain) loss   -   -   -   -   -   -   -
General and administrative   -   -   -   -   -   16,314   16,314
General and administrative - third party costs   -   -   -   -   -   -   -
Foreign exchange   -   -   -   -   -   (5)   (5)
Finance costs   -   -   -   -   -   9,970   9,970
Income taxes   -   -   -   -   -   9,437   9,437
Net earnings (loss)   44,321   24,773   (630)   -   -   (35,716)   32,748
                             
Purchase of property and equipment   16,910   363   64   -   -   -   17,337
 
(1) The joint venture is recorded using the equity method of accounting. The Company's share of individual assets and liabilities are recognized as an investment on the consolidated statements of financial position, and revenues and expense are recognized with net earnings as a (gain) loss from investment in joint venture on the consolidated statements of operations and comprehensive income.
 


ADVISORY

NON-GAAP MEASURES DEFINITIONS

This document contains references to certain financial measures and associated per share data that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies.  These financial measures are computed on a consistent basis for each reporting period and include EBITDA, EBITDA from investment in joint venture, Adjusted EBITDA, Adjusted EBITDA from investment in joint venture, Adjusted net earnings, working capital, Senior Debt to Bank EBITDA, Total Debt to Bank EBITDA, Bank EBITDA to Cash Interest Expense, drilling days, operating days, utilization rate - drilling day, utilization rate - operating day, and rate per operating day or dayrate.  These non-GAAP measures are identified and defined as follows:

"EBITDA" is a measure of the Company's operating profitability. EBITDA provides an indication of the results generated by the Company's principal business activities prior to how these activities are financed, assets are depreciated and amortized or how the results are taxed in various jurisdictions.

"EBITDA from investment in joint venture" provides an indication of the results generated by the Company's joint venture operations prior to how these activities are financed, assets are depreciated and amortized or how the results are taxed in various jurisdictions.

"Adjusted EBITDA" is used by management and investors to analyze EBITDA (as defined above) prior to the effect of foreign exchange, share-based payment expense, impairment expenses and the sale of assets. Adjusted EBITDA also takes into account the Company's portion of the principal activities of the joint venture arrangement by removing the loss (gain) from investment in joint venture and including Adjusted EBITDA from investment in joint venture. Adjusted EBITDA is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted EBITDA provides an indication of the results generated by the Company's principal business activities prior to how these activities are financed, assets are depreciated, amortized and impaired, the impact of foreign exchange, how the results are taxed in various jurisdictions and effects of share-based payment expenses.

Adjusted EBITDA is calculated as follows:

       
Three months ended March 31,  
($ thousands) 2014 2013
EBITDA  81,255 82,014
Plus:     
   Loss (gain) on sale of property and equipment  (10,539) 36
   Share-based payment expense  5,575 2,791
   Foreign exchange  3,154 (5)
   Loss from investment in joint venture  131 -
Less:     
   Adjusted EBITDA from investment in joint venture  (135) -
Adjusted EBITDA  79,441 84,836

 

"Adjusted EBITDA from investment in joint venture" is used by management and investors to analyze EBITDA (as defined above) prior to the effect of foreign exchange, share-based payment expense, impairment expenses and the sale of assets. Adjusted EBITDA from investment in joint venture is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted EBITDA from investment in joint venture provides an indication of the results generated by the TDI's principal business activities prior to how these activities are financed, assets are depreciated, amortized and impaired, the impact of foreign exchange, how the results are taxed in various jurisdictions and effects of share-based payment expenses.

Adjusted EBITDA from investment in joint venture is calculated as follows:

       
Three months ended March 31,    
($ thousands) 2014   2013
  EBITDA from investment in joint venture  (131)   -
  Less:       
  Foreign exchange  (4)   -
  Adjusted EBITDA from investment in joint venture  (135)   -

 

"Adjusted net earnings" is used by management and the investment community to analyze net earnings prior to the effect of foreign exchange, share-based payment expense, any gains or losses on the sale of assets in the period and impairment charges, including taking into account the tax effects of these items. This measure is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted net earnings is a useful measure because it provides an indication of results of the Company's principal business activities before consideration of fluctuations in foreign exchange gains and losses, impairment and share-based payment expenses, which are not consistently incurred period over period.

"Working capital" is used by management and the investment community to analyze the operating liquidity available to the Company.

"Senior Debt to Bank EBITDA" is defined as the consolidated balance of the revolving facility and other debt secured by a lien at quarter end to consolidated Bank EBITDA for the trailing 12 months (TTM).  Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange.

"Total Debt to Bank EBITDA" is defined as the consolidated balance of long-term debt, which includes the Senior Debt, Senior Notes Payable and dividends payable at quarter end, to consolidated Bank EBITDA for the TTM.  Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange.

"Bank EBITDA to Cash Interest Expense" is defined as the consolidated Bank EBITDA for TTM to the cash interest expense on all debt balances for TTM.  Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange.

"Drilling days" is defined as rig days between spud to rig release.

"Operating days" is defined as moving days (move in, rig up and tear out) plus drilling days (spud to rig release).

"Utilization rate - drilling day" is defined as drilling days divided by total available rig days.

"Utilization rate - operating day" is defined as operating days (drilling days plus moving days) divided by total available rig days.

"Rate per operating day" or "dayrate" is defined as operating revenue (net of third party costs) divided by operating days (drilling days plus moving days).

ADDITIONAL GAAP MEASURES DEFINITIONS

The Company uses certain additional GAAP financial measures within the financial statements and document that are not defined terms under IFRS to assess performance. Management believes that these measures provide useful supplemental information to investors. These financial measures are computed on a consistent basis for each reporting period and include Funds provided by operations, Operating income, Operating income percentage and Operating income - net percentage. These additional GAAP measures are identified and defined as follows:

"Funds provided by operations" is used by management and investors to analyze the funds generated by Trinidad's principal business activities prior to consideration of working capital, which is primarily made up of highly liquid balances. This balance is reported in the Consolidated Statements of Cash Flows included in the cash provided by operating activities section.

"Operating income" is used by management and investors to analyze overall and segmented operating performance.  Operating income is not intended to represent an alternative to net earnings or other measures of financial performance calculated in accordance with IFRS.  Operating income is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information contained in the notes to the consolidated financial statements. Operating income is defined as revenue less operating expenses.

"Operating income percentage" is used by management and investors to analyze overall and segmented operating performance, including third party recovery and third party costs, as well as inter-segment revenue and inter-segment operating costs. Operating income percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information in the notes to the consolidated financial statements. Operating income percentage is defined as operating income divided by revenue.

"Operating income - net percentage" is used by management and investors to analyze overall and segmented operating performance excluding third party recovery and third party costs, as well as inter-segment revenue and inter-segment operating costs, as these revenues and expenses do not have an effect on consolidated net earnings. Operating income - net percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information in the notes to the consolidated financial statements. Operating income - net percentage is defined as operating income less third party G&A expenses divided by revenue net of operating and G&A third party costs.

Trinidad is a corporation focused on sustainable growth that trades on the Toronto Stock Exchange under the symbol TDG. Trinidad's divisions operate in the drilling and barge-drilling sectors of the North American oil and natural gas industry with operations in Canada, the United States and Mexico. Additionally, up until June 30, 2013, Trinidad's operations included coring rigs which have subsequently been sold. In addition, through a joint venture agreement signed in the current period, Trinidad has the opportunity to operate drilling rigs in other international markets such as Saudi ArabiaTrinidad is focused on providing modern, reliable, expertly designed equipment operated by well-trained and experienced personnel. Trinidad's drilling fleet is one of the most adaptable, technologically advanced and competitive in the industry.

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking statements relating to Trinidad's plans, strategies, objectives, expectations and intentions.  The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "confident", "might" and similar expressions are intended to identify forward-looking information or statements. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this document. The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon.  Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve 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 or statements. In particular, but without limiting the foregoing, this document may contain forward-looking information and statements pertaining to the completion of announced rig construction programs on a timely basis and economical terms; the assumption that Trinidad's customers will honour their take-or-pay contracts; fluctuations in the demand for Trinidad's services; the ability for Trinidad to attract and retain qualified personnel, in particular field staff to crew the Company's rigs; the existence of competitors, technological changes and developments in the oilfield services industry; the existence of operating risks inherent in the oilfield services industry; assumptions respecting capital expenditure programs and other expenditures by oil and gas exploration and production companies; assumptions regarding commodity prices, in particular oil and natural gas; assumptions respecting supply and demand for commodities, in particular oil and natural gas; assumptions regarding foreign currency exchange rates and interest rates; the existence of regulatory and legislative uncertainties; the possibility of changes in tax laws; and general economic conditions including the capital and credit markets; assumptions made about future performance and operations of the joint venture arrangement. Trinidad cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information and statements contained in this document speak only as of the date of this document and Trinidad assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws. 

 

 

SOURCE: Trinidad Drilling Ltd.

For further information:

Lyle Whitmarsh,
Chief Executive Officer

Brent Conway,
President

Lisa Ottmann
Vice President, Investor Relations
(403) 294-4401
email:  lottmann@trinidaddrilling.com

Profil de l'entreprise

Trinidad Drilling Ltd.

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