AKITA Drilling Ltd. Announces Second Quarter Results



    CALGARY, Aug. 7 /CNW/ - AKITA Drilling Ltd. announced second quarter
earnings and funds flow today. Earnings for the three months ended June 30,
2008 were $1,498,000 ($0.08 per share) on revenue of $20,278,000 compared with
$3,091,000 ($0.17 per share) on revenue of $27,315,000 in 2007. Funds flow
from continuing operations for the quarter ended June 30, 2008 was $3,335,000
compared to $6,179,000 in the corresponding quarter in 2007. In addition,
during the second quarter, the Company generated $5,491,000 from the sale of
underutilized assets.
    AKITA Drilling Ltd.'s net earnings for the six months ended June 30, 2008
were $9,145,000 ($0.50 per share) on revenue of $67,660,000. Comparative
figures for 2007 were earnings of $12,178,000 ($0.67 per share) on revenue of
$79,485,000. Funds flow from continuing operations for the period was
$17,609,000 compared to $21,717,000 in 2007.
    On June 2, 2008, the Company cancelled 229,000 stock options having
exercise prices of $22.25 to $22.48 per option. This resulted in a one-time
non cash increase of $1,000,000 in selling and administrative expense and a
corresponding increase in contributed surplus. As required by Canadian
Generally Accepted Accounting Principles (GAAP), this is an accelerated
expense of $1,000,000 for the remaining unrecognized value of the cancelled
stock options and is reflected in this quarter rather than over the remaining
term of the options.
    The negative effect of weaker market conditions was impacted by
abnormally wet weather for much of the second quarter, resulting in lower
revenue and contribution margins for all rig categories. Operating statistics
for the first six months of 2008 and 2007 are as follows:


    
                              Number of Rigs          Number       Operating
                                                     of Wells         Days
                              Gross       Net        Drilled       (Drilling)
    -------------------------------------------------------------------------
    Canadian        2008        38       35.225         401            2,977
    Drilling        2007        39       35.575         487            3,122
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Alaskan         2008         2          1.0           1               60
    Drilling        2007         3          1.5           3              131
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total           2008        40       36.225         402            3,037
    Drilling        2007        42       37.075         490            3,253
    -------------------------------------------------------------------------
    

    During the second quarter, the Company sold its joint venture well
service assets and one underutilized joint venture drilling rig.
    Although overall activity levels for AKITA's fleet have been weaker than
during the comparative period in 2007, management is becoming increasingly
optimistic about prospects for the future as a number of larger customers are
working on plans to develop "higher impact" projects - projects that will
require a significant contribution on the part of their suppliers. Any
positive impact from these projects will not be visible prior to the upcoming
winter.
    Financial results for the second quarter are as follows:



    
    -------------------------------------------------------------------------
    Consolidated Balance Sheets
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Unaudited                                       June 30       December 31
    ($000's)                                    2008       2007       2007
    -------------------------------------------------------------------------

    ASSETS
    Current assets
      Cash                                   $  59,698  $  35,629  $  43,166
      Accounts receivable                       18,107     28,527     22,505
      Other                                        849      1,101        272
                                             --------------------------------
                                                78,654     65,257     65,943
    Restricted cash                              5,000          -      5,000
    Capital assets                             145,885    151,508    152,579
                                             --------------------------------

                                             $ 229,539  $ 216,765  $ 223,522
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES
    Current liabilities
      Accounts payable and accrued
       liabilities                           $   9,451  $  11,668  $  13,051
      Dividends payable                          1,279      1,279      1,279
      Income taxes payable                       1,877      1,172        873
      Deferred revenue                           1,281      1,566      1,617
                                             --------------------------------

                                                13,888     15,685     16,820
    Future income taxes                         16,166     15,626     15,055
    Pension liability                            3,740      3,498      3,609

    CLASS A AND CLASS B SHAREHOLDERS' EQUITY
    Class A and Class B shares                  23,369     23,376     23,369
    Contributed surplus                          2,230        962      1,110
    Retained earnings                          170,146    157,618    163,559
                                             --------------------------------

                                               195,745    181,956    188,038
                                             --------------------------------

                                             $ 229,539  $ 216,765  $ 223,522
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Consolidated Statements of Earnings,
    Comprehensive Income and Retained Earnings
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Unaudited                            Three Months          Six Months
    ($000's except per share amounts)       Ended                 Ended
                                           June 30               June 30
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    REVENUE                       $  20,278  $  27,315  $  67,660  $  79,485
                                  -------------------------------------------

    COSTS AND EXPENSES
      Operating and maintenance      13,403     15,912     40,718     45,570
      Depreciation                    3,143      2,561      8,627      7,474
      Selling and administrative      4,680      3,884      8,947      8,451
                                  -------------------------------------------
                                     21,226     22,357     58,292     61,495
                                  -------------------------------------------
    Revenue less costs and
     expenses                          (948)     4,958      9,368     17,990
                                  -------------------------------------------

    OTHER INCOME (EXPENSE)
      Interest income                   500        375        977        784
      Gain on sale of joint venture
       interests in rigs and
       other assets                     647         31        664        134
      Gain (loss) on foreign
       currency translation             (25)      (521)        42       (617)
                                  -------------------------------------------
                                      1,122       (115)     1,683        301
                                  -------------------------------------------
    EARNINGS BEFORE INCOME TAXES        174      4,843     11,051     18,291
                                  -------------------------------------------

    INCOME TAXES
      Current                           454      1,335      2,656      4,355
      Future                            (34)       230      1,111      1,610
                                  -------------------------------------------
                                        420      1,565      3,767      5,965
                                  -------------------------------------------
    EARNINGS (LOSS) FROM
     CONTINUING OPERATIONS             (246)     3,278      7,284     12,326

    Gain on disposal from
     discontinued operations, net
     of tax                           1,941          -      1,941          -
    Discontinued operations, net
     of tax                            (197)      (187)       (80)      (148)
                                  -------------------------------------------

    NET EARNINGS AND
     COMPREHENSIVE INCOME             1,498      3,091      9,145     12,178

    Retained earnings, beginning
     of period                      169,927    155,994    163,559    148,781
    Dividends declared               (1,279)    (1,285)    (2,558)    (2,565)
    Adjustment on repurchase and
     cancellation of share capital        -       (182)         -       (776)
                                  -------------------------------------------
    RETAINED EARNINGS, END
     OF PERIOD                    $ 170,146  $ 157,618  $ 170,146  $ 157,618
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (Loss) per Class A
     and Class B share
     from continuing operations
      Basic                       $   (0.01) $    0.18  $    0.40  $    0.68
      Diluted                     $   (0.01) $    0.17  $    0.40  $    0.68

    Earnings per Class A and
     Class B share
      Basic                       $    0.08  $    0.17  $    0.50  $    0.67
      Diluted                     $    0.08  $    0.16  $    0.50  $    0.66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Consolidated Statements of Cash Flows
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Unaudited                            Three Months          Six Months
    ($000's)                                Ended                 Ended
                                           June 30               June 30
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES
    Earnings from continuing
     operations                   $    (246) $   3,278  $   7,284  $  12,326
    Non-cash items included in
     earnings from continuing
     operations
      Depreciation                    3,143      2,561      8,627      7,474
      Future income taxes               (34)       230      1,111      1,610
      Expense for defined benefit
       pension plan                      66         66        131        131
      Stock options charged to
       expense                        1,053         75      1,120        310
      Gain on sale of joint
       venture interests in rigs
       and other assets                (647)       (31)      (664)      (134)
                                  -------------------------------------------
    Funds flow from continuing
     operations                       3,335      6,179     17,609     21,717
    Cash provided from
     discontinued operations           (160)      (126)        24        (34)
    Change in non-cash working
     capital                         16,640     20,021        857     (6,729)
                                  -------------------------------------------
                                     19,815     26,074     18,490     14,954
                                  -------------------------------------------
    INVESTING ACTIVITIES
    Capital expenditures             (3,528)   (15,681)    (4,082)   (25,558)
    Proceeds on sale of joint
     venture interests in rigs
     and other assets                 1,116         32      1,140        171
    Proceeds on sale of
     discontinued assets              3,510          -      3,510          -
    Change in non-cash working
     capital                            223       (775)        32       (460)
                                  -------------------------------------------
                                      1,321    (16,424)       600    (25,847)
                                  -------------------------------------------
    FINANCING ACTIVITIES
    Increase (decrease) in bank
     indebtedness                         -     (2,850)         -          -
    Dividends paid                   (1,279)    (1,285)    (2,558)    (2,565)
    Repurchase of share capital           -       (197)         -       (840)
    Change in non-cash working
     capital                              -        (26)         -          -
                                  -------------------------------------------
                                     (1,279)    (4,358)    (2,558)    (3,405)
                                  -------------------------------------------
    INCREASE (DECREASE) IN CASH      19,857      5,292     16,532    (14,298)
    Cash position, beginning of
     period                          39,841     30,337     43,166     49,927
                                  -------------------------------------------
    CASH POSITION, END OF PERIOD  $  59,698  $  35,629  $  59,698  $  35,629
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest paid during the
     period                       $       1  $       6  $       7  $     39
    Income taxes paid during the
     period                       $     503  $   1,583  $   2,488  $  9,056
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    FORWARD-LOOKING STATEMENTS

    From time to time Akita Drilling Ltd. ("AKITA" or the "Company") makes
written and verbal forward-looking statements. These forward-looking
statements include but are not limited to comments with respect to our
objectives and strategies, financial condition, the results of our operations
and our business, our outlook for our industry and our risk management
discussion. Forward-looking statements are typically identified with words
such as "believe", "expect", "forecast", "anticipate", "intend", "estimate",
"plan" and "project" and similar expressions of future or conditional events
such as "will", "may", "should", "could" or "would".
    By their nature these forward-looking statements involve numerous
assumptions, inherent risks and uncertainties, both general and specific, and
the risk that predictions and other forward-looking statements will not be
achieved. We caution readers of this News Release not to place undue reliance
on these forward-looking statements as a number of important factors could
cause actual future results to differ materially from the plans, objectives,
expectations, estimates and intentions expressed in such forward-looking
statements.
    Forward-looking statements may be influenced by the following factors:
the level of exploration and development activity carried on by AKITA's
customers, world oil and North American natural gas prices, weather, access to
capital markets and government policies. We caution that the foregoing list of
important factors is not exhaustive and that when relying on forward-looking
statements to make decisions with respect to AKITA, investors and others
should carefully consider the foregoing factors as well as other uncertainties
and events.

    %SEDAR: 00002868E




For further information:

For further information: Murray Roth, Vice President, Finance and Chief
Financial Officer, (403) 292-7950, website: http://www.akita-drilling.com


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