AKITA Drilling Ltd. Announces Third Quarter Results



    CALGARY, Oct. 31 /CNW/ - AKITA Drilling Ltd. announced third quarter
earnings and funds flow today. AKITA Drilling Ltd.'s net earnings for the nine
months ended September 30, 2007 were $14,374,000 or $0.79 per share on revenue
of $110,182,000. Comparative figures for 2006 were $25,400,000 or $1.37 per
share of net earnings on revenue of $132,980,000. Funds flow from operations
for the period was $27,803,000 compared to $35,666,000 in 2006.
    Earnings for the three months ended September 30, 2007 were $2,196,000
($0.12 per share) on revenue of $29,964,000 compared to $6,850,000 ($0.37 per
share) on revenue of $38,856,000 in 2006. Funds flow from operations for the
quarter ended September 30, 2007 was $6,120,000 compared to $10,389,000 in the
corresponding quarter in 2006.
    The following table shows AKITA's number of rigs and activity levels for
the nine months ended September 30, 2007 along with comparative information
for the corresponding period in 2006:

    
                                                   Number
                                                 of Wells           Operating
                                                  Drilled Operating   Hours
                                                     or      Days    (Servi-
                                  Number of Rigs  Serviced (Drilling)  cing)
                                   Gross    Net
    -------------------------------------------------------------------------
    Canadian Drilling      2007       39   35.575      697    4,558      N/A
                         ----------------------------------------------------
                           2006       38   35.075    1,002    6,103      N/A
    -------------------------------------------------------------------------
    Alaskan Drilling       2007        3      1.5        3      131      N/A
                         ----------------------------------------------------
                           2006        1      0.5        3       88      N/A
    -------------------------------------------------------------------------
    Total  Drilling        2007       42   37.075      700    4,689      N/A
                         ----------------------------------------------------
                           2006       39   35.575    1,005    6,191      N/A
    -------------------------------------------------------------------------
    Canadian Well
     Servicing             2007        3      1.5       35      N/A    1,703
                         ----------------------------------------------------
                           2006        3      1.5       47      N/A    3,901
    -------------------------------------------------------------------------
    

    Reduced drilling industry activity had a negative impact on day rates for
all sizes of rigs that were not working under term contracts. Weaker market
conditions have also resulted in fewer opportunities for investment in new
rigs. Consequently, AKITA has focussed its efforts on strengthening its
already strong balance sheet. At September 30, 2007, the Company had
$53,098,000 in working capital and no long-term debt.
    Management anticipates that the reduction in demand that impacted third
quarter results will extend into the fourth quarter and throughout the winter
drilling season. Although crude oil prices are strong and the market for heavy
oil pad rigs continues to provide optimism, drilling for natural gas has
historically been the largest component of AKITA's market. In contrast to
crude oil, natural gas prices must increase and remain higher in order for
AKITA to show sustainable improvement in this market. Although the Company has
work plans for approximately 90% of its fleet for the winter, this implies a
weaker outlook than would have been present for the corresponding time in 2006
since not all active rigs will have continuous work for the upcoming winter.
    On October 25, 2007, the Alberta government released its revised
provincial royalty framework for crude oil and natural gas. The effects of
this new royalty structure, scheduled to become effective in 2009, are
uncertain but could affect future drilling activity in Alberta.
    Financial results for the first nine months are as follows:

    
    Consolidated Balance Sheets

    -------------------------------------------------------------------------
                                               September 30      December 31
    Unaudited ($000's)                      2007         2006        2006

    -------------------------------------------------------------------------
    Assets
    Current assets
      Cash                               $  38,778    $  43,079    $  49,927
      Accounts receivable                   26,604       34,978       38,529
      Other                                    651        1,353          206
                                         ------------------------------------

                                            66,033       79,410       88,662
    Investments                                  -           55            -
    Capital assets                         149,079      125,197      133,575
                                         ------------------------------------

                                         $ 215,112    $ 204,662    $ 222,237

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current liabilities
      Accounts payable and accrued
       liabilities                       $  10,722    $  14,552    $  24,772
      Deferred revenue                         783            -            -
      Dividends payable                      1,279        1,110        1,285
      Income taxes payable                     151        4,439        5,924
                                         ------------------------------------

                                            12,935       20,101       31,981
    Future income taxes                     15,749       13,852       14,016
    Pension liability                        3,563        3,302        3,367

    Class A and Class B Shareholders'
     Equity
    Class A and Class B shares              23,369       23,566       23,440
    Contributed surplus                      1,036          571          652
    Retained earnings                      158,460      143,270      148,781
                                         ------------------------------------

                                           182,865      167,407      172,873
                                         ------------------------------------

                                         $ 215,112    $ 204,662    $ 222,237

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Earnings,
    Comprehensive Income and Retained Earnings

    -------------------------------------------------------------------------
                                  Three Months               Nine Months
                                      Ended                     Ended
    Unaudited ($000's except      September 30              September 30
     per share amounts)        2007         2006         2007         2006
    -------------------------------------------------------------------------

    Revenue                 $  29,964    $  38,856    $ 110,182    $ 132,980
                            -------------------------------------------------

    Costs and expenses
      Operating and
       maintenance             19,610       22,418       65,772       75,303
      Depreciation              3,724        3,157       11,312       11,012
      Selling and
       administrative           3,670        3,638       12,347       12,897
                            -------------------------------------------------
                               27,004       29,213       89,431       99,212
                            -------------------------------------------------
      Operating income          2,960        9,643       20,751       33,768
                            -------------------------------------------------

    Other income (expenses)
      Interest income             449          504        1,233        1,413
      Gain on sale of joint
       venture interests in
       rigs and other assets       62          243          196          686
      Gain (loss) on foreign
       currency translation      (208)          (9)        (825)        (110)
                            -------------------------------------------------
                                  303          738          604        1,989
                            -------------------------------------------------
    Earnings before income
     taxes                      3,263       10,381       21,355       35,757
                            -------------------------------------------------

    Income taxes
      Current                     944        3,037        5,248       10,705
      Future                      123          494        1,733         (348)
                            -------------------------------------------------
                                1,067        3,531        6,981       10,357
                            -------------------------------------------------
    Net earnings and
     comprehensive income       2,196        6,850       14,374       25,400
                            -------------------------------------------------

    Retained earnings,
     beginning of period      157,618      139,812      148,781      124,343
    Dividends declared         (1,273)      (1,110)      (3,838)      (3,335)
    Adjustment on repurchase
     and cancellation of
     share capital                (81)      (2,282)        (857)      (3,138)
                            -------------------------------------------------
    Retained earnings, end
     of period              $ 158,460    $ 143,270    $ 158,460    $ 143,270
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per Class A
     and Class B share
      Basic                 $    0.12    $    0.37    $    0.79    $    1.37
      Diluted               $    0.12    $    0.37    $    0.78    $    1.36
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows

    -------------------------------------------------------------------------
                                  Three Months               Nine Months
                                      Ended                     Ended
                                  September 30              September 30
    Unaudited ($000's)         2007         2006         2007         2006
    -------------------------------------------------------------------------

    Operating Activities
    Net earnings            $   2,196    $   6,850    $  14,374    $  25,400
    Non-cash items
     included in earnings
      Depreciation              3,724        3,157       11,312       11,012
      Future income taxes         123          494        1,733         (348)
      Expense for defined
       benefit pension plan        65           65          196          200
      Stock options charged
       to expense                  74           66          384           88
      Gain on sale of joint
       venture interests in
       rigs and other assets      (62)        (243)        (196)        (686)
                            -------------------------------------------------
    Funds flow from
     operations                 6,120       10,389       27,803       35,666
    Change in non-cash
     working capital              527       (5,591)      (6,202)         835
                            -------------------------------------------------
                                6,647        4,798       21,601       36,501
                            -------------------------------------------------
    Investing Activities
    Capital expenditures       (5,973)     (12,205)     (31,531)     (30,464)
    Proceeds on sale of joint
     venture interests in
     rigs and other assets      4,740          483        4,911        1,055
    Change in non-cash
     working capital             (898)        (880)      (1,358)        (222)
                            -------------------------------------------------
                               (2,131)     (12,602)     (27,978)     (29,631)
                            -------------------------------------------------
    Financing Activities
    Dividends paid             (1,273)      (1,110)      (3,838)      (3,335)
    Proceeds received on
     exercise of stock
     options                        -            -            -          205
    Repurchase of share
     capital                      (88)      (2,438)        (928)      (3,317)
    Change in non-cash
     working capital               (6)        (106)          (6)         (29)
                            -------------------------------------------------
                               (1,367)      (3,654)      (4,772)      (6,476)
                            -------------------------------------------------
    Increase (Decrease) in
     Cash                       3,149      (11,458)     (11,149)         394
    Cash position, beginning
     of period                 35,629       54,537       49,927       42,685
                            -------------------------------------------------
    Cash Position, End of
     Period                 $  38,778    $  43,079    $  38,778    $  43,079
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Interest paid during
     the period             $      14    $       -    $      53    $       -
    Income taxes paid
     during the period      $   1,964    $   2,268    $  11,021    $  12,127
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    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 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
achieved. Readers of this News Release are cautioned not to place undue
reliance on these statements as a number of important factors could cause
actual future results to differ materially from the plans, objectives,
estimates and intentions expressed in such forward-looking statements.
    Forward-looking statements may be influenced by the following factors:
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, geopolitical events and government
policies. We caution that the foregoing list of factors is not exhaustive and
that investors and investment advisors should carefully consider the foregoing
factors as well as other uncertainties and events prior to making a decision
to invest in AKITA.





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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