Trinidad Drilling Ltd. Reports Solid Fourth Quarter And Year-end 2012 Results; Growth In Adjusted EBITDA, Stable Operating Margins

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

TSX SYMBOL:  TDG

CALGARY, March 6, 2013 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or "the Company") reported solid 2012 results with growth in adjusted EBITDA (1) and stable operating margins. The demand for Trinidad's modern, high-performance equipment offset a softening in market conditions in the second half of 2012 and adjusted EBITDA grew by 9.7% over the level recorded in 2011.

"This past year has been an important year for Trinidad," said Lyle Whitmarsh, Trinidad's Chief Executive Officer.  "Our fleet of modern, efficient rigs has continued to perform strongly despite some industry weakness, while we have also seen progression on a number of other fronts within the Company. In 2012, we grew our operations in both Canada and the US, adding nine rigs under long-term contract; we further diversified our customer base; and we continued to lower our leverage. Our progress in these and other areas has positioned us well for future success in 2013 and beyond."

(1) Please see the Non-GAAP Measures Definitions section of this document for further details.

             
FINANCIAL HIGHLIGHTS            
  Three months ended December 31, For the years ended December 31, 
($ thousands except share and per share data) 2012 2011 % Change 2012 2011 % Change
Revenue  209,557 231,106 (9.3) 859,327 818,150 5.0
Revenue, net of third party costs 196,103 213,885 (8.3) 803,546 757,606 6.1
Operating income (1) 77,758 88,976 (12.6) 329,151 308,487 6.7
Operating income percentage (1) 37.1% 38.5% (3.6) 38.3% 37.7% 1.6
Operating income - net percentage (1) 39.7% 41.6% (4.6) 41.0% 40.7% 0.7
EBITDA (1) 63,323 69,545 (8.9) 272,359 250,539 8.7
  Per share (diluted) (2) 0.52 0.58 (10.3) 2.25 2.07 8.7
Adjusted EBITDA (1) 63,332 74,401 (14.9) 277,015 252,476 9.7
  Per share (diluted) (2) 0.52 0.62 (16.1) 2.29 2.09 9.6
Cash provided by operations 75,661 47,583 59.0 259,005 187,817 37.9
  Per share (basic / diluted) (2) 0.63 0.39 61.5 2.14 1.55 38.1
Funds provided by operations (1) 60,915 73,534 (17.2) 235,240 217,689 8.1
  Per share (basic / diluted) (2) 0.50 0.61 (18.0) 1.95 1.80 8.3
Net earnings (12,246) 25,318 (148.4) 55,038 76,481 (28.0)
  Per share (basic / diluted) (2) (0.10) 0.21 (147.6) 0.46 0.63 (27.0)
Adjusted net earnings (1) 57,807 30,174 91.6 138,547 87,411 58.5
  Per share (basic / diluted) (2) 0.48 0.25 92.0 1.15 0.72 59.7
Capital expenditures net of dispositions 16,763 63,437 (73.6) 163,199 135,653 20.3
Dividends declared 6,043 6,043 - 24,172 24,172 -
Shares outstanding - basic             
  (weighted average) (2)  120,859,476   120,859,476 - 120,859,476 120,855,217 -
Shares outstanding - diluted            
  (weighted average) (2)  120,859,476   120,907,495 - 120,859,476 120,903,236 -
             
As at       December 31, December 31,  
($ thousands except percentage data)       2012 2011  % Change 
Total assets       1,541,294 1,608,126 (4.2)
Total long-term liabilities       585,629 666,717 (12.2)

 

(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, the number of shares issuable pursuant to the Incentive Option Plan.

             
OPERATING HIGHLIGHTS             
  Three months ended December 31,  For the years ended December 31, 
    2012 2011 % Change 2012 2011 % Change
Land Drilling Market             
Operating days (1)            
   Canada  2,915 3,665 (20.5) 11,543 13,345 (13.5)
   United States and International 4,789 5,547 (13.7) 20,378 21,383 (4.7)
Rate per operating day (2, 3)            
   Canada (CDN$) 26,190 23,652 10.7 24,637 21,338 15.5
   United States and International (CDN$) 22,305 20,710 7.7 22,335 18,929 18.0
   United States and International (US$) 22,589 20,387 10.8 22,285 19,153 16.4
Utilization rate - operating day (1, 4)            
   Canada  56% 74% (24.3) 56% 67% (16.4)
   United States and International 77% 92% (16.3) 83% 91% (8.8)
   Utilization rate for service rigs (5)  - - - - 51% -
Number of drilling rigs at period end            
   Canada  59 54 9.3 59 54 9.3
   United States and International 68 64 6.3 68 64 6.3
   Number of coring and surface casing rigs at period end 15 20 (25.0) 15 20 (25.0)
Barge Drilling Market             
   Operating days (1) 386 373 3.5 1,555 1,708 (9.0)
   Rate per operating day (CDN$) (2, 3) 29,954 25,835 15.9 28,669 23,765 20.6
   Rate per operating day (US$) (2, 3) 30,330 25,455 19.2 28,612 24,087 18.8
   Utilization rate - operating day (4) 84% 81% 3.7 85% 94% (9.6)
   Number of barge drilling rigs at period end 2 2 - 2 2 -
   Number of barge drilling rigs under Bareboat Charter Agreements at period end 3 3 - 3 3 -
               
               

(1) Operating days include drill days and move days.
(2) Rate per operating day is based on operating revenue divided by operating days.
(3) Operating revenue is presented net of third party costs.
(4) Utilization rate - operating day is based on operating days divided by total days available.
(5) In the second quarter of 2011, Trinidad disposed of its 22 well servicing rigs and related equipment.

OVERVIEW

Over the past few years the drilling industry has experienced a high level of volatility and 2012 was no different. The industry started the year with strong activity levels and increasing pricing as demand remained high, especially in oil and liquids-rich plays. Natural gas prices, particularly in the first half of the year, were weak during 2012 and the industry saw a large migration of rigs from dry gas plays into oil or liquids-rich areas. Trinidad's high contract base and adaptable equipment allowed the Company to move a large number of its rigs under their contract terms with minimal impact to its operations.

As 2012 progressed, crude oil prices began to weaken resulting in reduced capital spending by oil and gas producers and lower activity levels in the drilling industry. Tighter economics led customers to be more concerned about the efficiency of the drilling equipment they were using and the gap between modern, high-performance equipment and older, conventional-style rigs became more apparent. With more than three-quarters of Trinidad's fleet classified as high-performance rigs, the Company's operations were far less impacted than the industry as a whole; its activity levels continued to outperform the industry and its dayrates remained strong.

INDUSTRY STATISTICS

                     
  Year to date 2012 Year to date 2011
  2012 Q4 Q3 Q2 Q1 2011 Q4 Q3 Q2 Q1
Commodity Prices                    
Henry Hub natural gas price (US$ per mmBtu) 2.75 3.40 2.88 2.29 2.43 4.00 3.33 4.12 4.37 4.18
Western Canada Select crude oil price
   (CDN$ per barrel)
71.70 60.73 76.29 74.10 75.91 77.53 83.38 73.52 81.96 71.34
WTI crude oil price (US$ per barrel) 94.09 88.17 92.15 93.30 102.99 94.88 94.02 89.49 102.02 94.07
                     
US Industry Activity                    
Average US industry active land rig count (1) 1,852 1,741 1,837 1,902 1,929 1,825 1,954 1,893 1,778 1,674
Average Trinidad active land rig count (2) 57 56 55 58 58 59 60 61 57 57
                     
Canadian Industry Activity                    
Average Canadian industry utilization (3) 39% 36% 42% 18% 65% 49% 54% 54% 23% 66%
Average Trinidad utilization (4) 52% 51% 58% 24% 77% 62% 69% 69% 31% 80%
                     

(1) Baker Hughes rig counts (information obtained from Tudor Pickering Holt & Company weekly rig roundup report).
(2) Includes US and international rigs, excludes rigs that are idle but contracted.
(3) Canadian Association of Oilwell drilling Contractors (CAODC) utilization.
(4) Based on drilling days (spud to rig release dates), excludes rigs that are idle but contracted.

Trinidad recorded strong results in 2012. Higher dayrates, although partly offset by lower operating days, drove increased revenue levels; and combined with an ongoing focus on cost control, adjusted EBITDA grew by 9.7% in 2012 compared to the prior year.

Adjusted net earnings increased 58.5% in 2012 over the previous year as a result of increased EBITDA, lower finance costs, lower income taxes and a larger gain on sale of assets. Net earnings in 2012 were lower than the previous year largely as a result of an impairment charge recorded in the fourth quarter of 2012.

In addition to achieving strong financial results, the Company added nine rigs to its operations during the year, five in Canada and four in the US. These rigs were all added under long-term, take-or-pay contracts and are equipped with the latest automation and advancements in drilling technology. As well, the Company was successful in reducing its rig concentration with one customer. Trinidad also added several new customers throughout the year, including two major producers with extensive future growth programs. In addition, the Company continues to work for a number of very active national oil companies. Trinidad was also able to make improvements to its above-average safety standards, further reducing the number of safety incidents in its operation during 2012.

Trinidad remains committed to its leverage reduction strategy and reduced its Total Debt to EBITDA ratio during 2012 to 1.91 times from 2.42 times. In order to meet its debt reduction targets, Trinidad has carefully managed its cost structure and its capital spending program by selecting projects that allow the Company to grow its business and continue as an industry leader, while also reducing its debt balances. Trinidad is moving towards its long-term leverage goal of Total Debt to EBITDA of 1.50 times.

FOURTH QUARTER 2012 HIGHLIGHTS

  • Adjusted EBITDA in the fourth quarter was $63.3 million, down 14.9% from the same quarter last year. Lower operating days in the current quarter more than offset the impact of higher dayrates and led to lower operating income. In addition, higher G&A expenses due to a one time bad debt expense of $1.6 million in the current period further reduced adjusted EBITDA.
  • Operating income - net percentage was 39.7% in fourth quarter 2012, in line with the third quarter of 2012 but down from 41.6% in the same quarter last year. Operating income - net percentage decreased year over year largely as a result of lower operating income and higher repairs and maintenance costs in the current quarter.
  • Adjusted net earnings in the fourth quarter were $57.8 million ($0.48 per share (diluted)) up 91.6% from the same quarter last year as lower finance costs and income taxes and a larger gain on sale of assets offset lower adjusted EBITDA in the current quarter.
  • Net earnings showed a loss of $12.4 million ($0.10 per share (diluted)) for the quarter, down 149.0% from the comparative period in 2011. Net earnings lowered quarter over quarter due to an impairment of $70.1 million recorded in the fourth quarter of 2012.
  • Trinidad continued to repay debt in the fourth quarter of 2012, lowering both the total debt outstanding and its Total Debt to EBITDA level. Total long-term liabilities lowered by $48.9 million in the last three months of the year and Total Debt to EBITDA was reduced to 1.91 times, compared to 1.96 times at the end of the third quarter of 2012 and 2.42 times at the end of 2011.
  • During the quarter, Trinidad added two newly built rigs to its Canadian operations, both under five-year, take-or-pay contracts and continued construction of the two remaining rigs in its 2012 rig build program.
  • In the fourth quarter of 2012, Trinidad recorded an impairment expense on certain rig and related equipment and building assets of $70.1 million. A total of $63.3 million was recorded in the US and international operations and $6.8 million in the Canadian operations. The impairment was based on appraisals obtained for assets deemed to be non-core.

FULL YEAR 2012 HIGHLIGHTS

  • Trinidad generated revenue of $859.3 million in 2012, an increase of 5.0% from 2011. Revenue grew in the current year as a result of higher dayrates in each of the Canadian and the US and international operations and an increased fleet size. These factors were partially offset by a reduction in operating days in 2012 due to softening market conditions in the second half of the year.
  • Operating income - net percentage was 41.0% in 2012, compared to 40.7% in 2011. The impact of higher revenue in 2012 was offset by increased operating costs in the US and international operations related to higher repairs and maintenance expenses incurred on rigs that had been working consistently for a number of years, leaving operating income - net percentage largely unchanged when compared to the prior year.
  • Adjusted EBITDA was $277.0 million in 2012, up 9.7% from 2011. Adjusted EBITDA increased in 2012 as a result of higher operating income and lower general and administrative costs (excluding share-based payments) compared to the prior year.
  • Adjusted net earnings were $138.5 million ($1.15 per share (diluted)) in 2012, up 58.5% from 2011 due to a higher adjusted EBITDA, lower finance costs, higher gain on asset sales and lower income taxes.
  • Net earnings were $55.0 million ($0.46 per share (diluted)) in 2012, down 28.0% from 2011. Net earnings decreased in 2012 largely due to an impairment of property and equipment.
  • In 2012, Trinidad continued to lower its leverage level and recorded Total Debt to EBITDA of 1.91 times, compared to 2.42 times at year-end 2011 and 3.18 times at the end of 2010. Trinidad remains committed to lowering its leverage with a long-term target of 1.50 times.
  • During the year, Trinidad added nine newly built rigs to its operations, all under long-term, take-or-pay contracts.
  • For the year ended December 31, 2012, due to the slow-down of the drilling industry, Trinidad recorded an impairment expense of $78.9 million for non-core rig and rig related equipment and certain building assets, with the majority included in the US and international operations.

RESULTS FROM OPERATIONS

               
Canadian Operations               
               
  Three months ended December 31,   For the years ended December 31, 
($ thousands except percentage and operating data) 2012 2011 % Change   2012 2011 % Change
Operating revenue (1, 2, 3) 77,577 89,250 (13.1)   303,500 310,935 (2.4)
Other revenue 120 132 (9.1)   414 823 (49.7)
  77,697 89,382 (13.1)   303,914 311,758 (2.5)
Operating costs (1, 2, 3) 47,308 54,459 (13.1)   177,111 188,695 (6.1)
Operating income (10) 30,389 34,923 (13.0)   126,803 123,063 3.0
Operating income - net percentage (10) 39.1% 39.1%     41.7% 39.5%  
               
Drilling days 2,677 3,427 (21.9)   10,646 12,390 (14.1)
Operating days (4) 2,915 3,665 (20.5)   11,543 13,345 (13.5)
Rate per operating day (CDN$) (5) 26,190 23,652 10.7   24,637 21,338 15.5
Utilization rate - operating day (6) 56% 74% (24.3)   56% 67% (16.4)
Utilization rate - drilling day (7) 51% 69% (26.1)   52% 62% (16.1)
CAODC industry average (8) 36% 54% (33.3)   39% 49% (20.4)
Number of drilling rigs at period end 59 54 9.3   59 54 9.3
               
 Utilization rate for service rigs (9) - - -   - 51% -
 Number of coring and surface rigs at period end  15 20 (25.0)   15 20 (25.0)
               

 

(1) Inter-segment revenue and operating costs have been excluded of $0.1 million and $9.6 million for the three and twelve months ended December 31, 2012, respectively, and $13.7 million and $56.6 million for the three and twelve months ended December 31, 2011, respectively. Each of these inter-segment revenue and operating costs relates to rig construction for the US operations.
(2) External construction revenue and operating costs are included in the table above of $0.3 million and $3.3 million, respectively, for the year ended December 31, 2012, and $2.1 million and $2.7 million, respectively, for the year ended December 31, 2011. External construction revenue and operating costs are included in the table above of $0.1 million and $3.0 million, respectively, for the three months ended December 31, 2012, and $1.0 million and $1.1 million, respectively, for the three months ended December 31, 2011.
(3) Operating revenue and operating costs exclude third party recovery and third party costs of $37.5 million for the twelve months ended December 31, 2012, and $43.8 million for the twelve months ended December 31, 2011. Operating revenue and operating costs exclude third party recovery and third party costs of $9.8 million for the three months ended December 31, 2012, and $12.9 million for the three months ended December 31, 2011.
(4) Operating days include drill days and move days.
(5) Rate per operating day is based on operating revenue divided by operating days.
(6) Utilization rate - operating day is based on operating days divided by total days available.
(7) Utilization rate - drilling day is based on drilling days divided by total days available.
(8) CAODC industry average is based on drilling days divided by total days available.
(9) In the second quarter of 2011, Trinidad disposed of all of its 22 well servicing rigs and related equipment.
(10) See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details.

Fourth Quarter 2012

Trinidad's Canadian operations performed strongly throughout the first half of 2012; however, the second half of the year reflected a shift in industry conditions with activity levels decreasing compared to the prior year. Although a slow down over the December holiday period is typical in the drilling industry, the fourth quarter of 2012 experienced a more significant reduction in activity levels on its lower capacity and lower specification equipment than was experienced in the prior year. This style of rig makes up a small portion of Trinidad's fleet; however, the reduced activity levels led to lower overall utilization and revenue in the current quarter. The operating days for the fourth quarter declined to 2,915 operating days and utilization of 56% in 2012, 3,233 days and 62% in the third quarter and 3,665 days and 74% utilization in the fourth quarter of 2011. The reduction in activity levels was consistent with the industry as oil and gas production companies took a cautious outlook on their capital spending in the fourth quarter due to weakening commodity prices.

Although operating days decreased into the fourth quarter, average dayrates grew substantially in the current period when compared to the third quarter of 2012 and fourth quarter of 2011. Average dayrates in the fourth quarter of 2012 were $2,689 per day higher than the third quarter of 2012, and $2,538 per day higher than the fourth quarter of 2011. The higher dayrates over the third quarter of 2012 were driven by additional equipment rental income, typical of the winter drilling season; while the higher dayrates versus the prior year were driven by a shift in rig mix, combined with additional new builds and a crew wage increase. The shift in rig mix had a favourable impact on dayrates as a combination of additional new builds as well as the reduced demand for lower capacity and lower specification equipment resulted in a higher percentage of operating days coming from the higher specification equipment which commands significantly higher dayrates and margins. In addition, standby revenue in the fourth quarter of 2012 accounted for $962 per day of the increase, while the standby revenue in the third quarter of 2012 and fourth quarter of 2011 accounted for $432 per day and $254 per day, respectively. Standby revenue inflates dayrates as the standby days do not count as operating days.

During the current quarter, Trinidad's coring division began to prepare for their winter season. Activity typically commences towards the end of the year and continues through the first quarter. However, costs associated with crew training and recruitment as well as rig reactivation costs generally occur in the fourth quarter with revenues recognized in the first quarter of the following year. This timing difference causes an unbalanced amount of expenses when compared to revenue related to these rigs. During the fourth quarter, Trinidad sold five of its underutilized coring rigs for a loss on the sale of less than $0.1 million.

In addition, in the fourth quarter of the current year, the Company's manufacturing division recorded a $2.9 million inventory write-off, which was reflected in the operating costs in the current period. Trinidad identified inventory related to the maintenance and upgrade of non-core assets and determined that these items would not be utilized within the organization.

Operating income - net percentage was 39.1% in the fourth quarter of 2012, in line with the same quarter last year but down from 43.9% recorded in the third quarter of 2012. In the current period, higher dayrates and strong activity levels in the Company's high quality drilling equipment were offset by a decrease in activity in the lower specification equipment; these factors, combined with an inventory write-off in the Company's manufacturing division, caused operating income - net percentage to decrease compared to the previous quarter in the Canadian operations.

Full Year 2012

In the current year, operating income increased by $3.7 million, or 3.0%, versus the same period of the prior year as higher dayrates in the contract drilling division, driven by strong demand in the first half of the year, more than offset lower activity levels in the latter half of the year. As well, Trinidad added five new rigs to its Canadian operation which increased the revenue generating capacity of the division and offset the negative impact of the sale of the well servicing rig assets in the second quarter of 2011. The strong operating performance of the Canadian operations was slightly offset by the negative impact of a $2.9 million inventory write-down in the Company's manufacturing division. Trinidad identified inventory related to the maintenance and upgrade of non-core assets and determined that these items would not be utilized within the organization.

Dayrates in Trinidad's Canadian operations increased in 2012 by $3,299 per operating day, compared to the previous year. Strong customer demand, particularly for high performance equipment, drove dayrates higher in the current year.

The full impact of higher dayrates was not reflected in the operating income - net percentage as a portion of the increase was the result of higher crew wages; these expenses are passed on to the operator at cost. In addition, dayrates were higher by $604 per operating day related to standby revenue in the current year versus $188 per operating day in the prior year. Standby revenues do not generate operating days, and therefore, inflate dayrates. Trinidad experienced an increased level of standby revenue in 2012 compared to 2011 as weaker commodity prices caused producers to reduce activity and re-evaluate capital programs.

Trinidad saw a softening of activity levels in the latter half of the current year mainly related to the Company's lower capacity equipment. Slower activity levels were largely driven by reduced capital spending by producers and uncertainty in relation to current and future commodity prices. However, the impact was muted by the Company's high level of a modern and technologically advanced fleet. Trinidad consistently outperforms industry activity levels and continued with this trend throughout the current period. For the year ended December 31, 2012, Trinidad recorded average utilization that was 13 percentage points higher than the industry, strongly demonstrating the ongoing demand for this type of equipment.

Operating income - net percentage in 2012 was higher than the prior year due to improved dayrates and an ongoing commitment to cost containment in the Canadian operations. In addition, the Company benefited from improved economies of scale in the current year due to the increased number of contract drilling rigs which generate higher margins and require less overhead than the well service assets, which were sold in the prior year.

During the year ended December 31, 2012, Trinidad's active rig fleet increased by five rigs; these rigs were constructed at the Company's in-house manufacturing division and were put into service under long-term, take-or-pay contracts. One new build was added in the second quarter, and two new builds were added in each of the third and fourth quarters of the current year.

Trinidad expects to complete construction of two additional rigs that were originally included in the 2012 new build program during the first half of 2013. At the date of this report, there have been no additional new build contracts signed for 2013. In comparison, by the end of 2011, the manufacturing division had delivered three rigs into the US operations and continued construction on two additional new builds that were added in early 2012.

In the second quarter of 2011, Trinidad sold its well service rig operations for proceeds of $38.0 million, excluding positive working capital. The decision to sell these assets reflected the Company's strategy to focus on its core business, the deep, modern contract drilling market where the Company can achieve greater economies of scale and anticipates greater opportunities for future growth. As such, there were no service rigs operating in 2012.

In the fourth quarter of 2012, Trinidad sold five of its coring rigs, reducing the Company's total number of coring rigs to 15 at December 31, 2012. The sale of these assets was in-line with the Company's strategy to dispose of underutilized assets. The loss on sale of these assets amounted to less than $0.1 million.

               
US & International Operations              
               
  Three months ended December 31,    For the years ended December 31,
($ thousands except percentage and operating data) 2012 2011 % Change   2012 2011 % Change
Operating revenue (1) 118,398 124,522 (4.9)   499,852 445,526 12.2
Other revenue 8 (19) 142.1   (220) 322 (168.3)
  118,406 124,503 (4.9)   499,632 445,848 12.1
Operating costs (1) 71,037 70,450 0.8   297,284 260,424 14.2
Operating income (6) 47,369 54,053 (12.4)   202,348 185,424 9.1
Operating income - net percentage (6) 40.0% 43.4%     40.5% 41.6%  
               
 Land Drilling Rigs               
Drilling days 4,168 4,955 (15.9)   17,663 19,192 (8.0)
Operating days (2) 4,789 5,547 (13.7)   20,378 21,383 (4.7)
Rate per operating day (CDN$) (3) 22,305 20,710 7.7   22,335 18,929 18.0
Rate per operating day (US$) (3) 22,589 20,387 10.8   22,285 19,153 16.4
Utilization rate - operating day (4) 77% 92% (16.3)   83% 91% (8.8)
Utilization rate - drilling day (5) 67% 82% (18.3)   72% 82% (12.2)
Number of drilling rigs at period end 68 64 6.3   68 64 6.3
               
 Barge Drilling Rigs               
Operating days (2) 386 373 3.5   1,555 1,708 (9.0)
Rate per operating day (CDN$) (3) 29,954 25,835 15.9   28,669 23,765 20.6
Rate per operating day (US$) (3) 30,330 25,455 19.2   28,612 24,087 18.8
Utilization rate - operating day (4) 84% 81% 3.7   85% 94% (9.6)
Number of barge drilling rigs at period end 2 2 -   2 2 -
Number of barge drilling rigs under
Bareboat Charter Agreements at period end
3 3 -   3 3 -

 

(1) Operating revenue and operating costs exclude third party recovery and third party costs of $18.2 million for the twelve months ended December 31, 2012, and $16.8 million for the twelve months ended December 31, 2011. Operating revenue and operating costs exclude third party recovery and third party costs of $3.6 million for the three months ended December 31, 2012, and $4.3 million for the three months ended December 31, 2011.
(2) Operating days include drill days and move days.
(3) Rate per operating day is based on operating revenue divided by operating days.
(4) Utilization rate - operating day is based on operating days divided by total days available.
(5) Utilization rate - drilling day is based on drilling days divided by total days available.
(6) See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details.

Fourth Quarter 2012

Operating revenue decreased in Trinidad's US and international operations in the fourth quarter of 2012 compared to the fourth quarter of 2011 and the third quarter of 2012 as lower operating days offset the impact of higher dayrates.

Dayrates improved in all quarters of 2012 over the comparative quarters of the prior year, with average dayrates of US$22,589 per day in the fourth quarter of 2012, an increase of US$2,202 per day compared to the fourth quarter of 2011 and US$326 per day compared to the third quarter of 2012. Higher dayrates were largely a result of increased demand for Trinidad's modern equipment as well as the movement of rigs into higher revenue generating areas. In addition, a shift in rig mix also positively impacted dayrates as reduced activity levels were mainly isolated to lower specification rigs as operators looked to high grade equipment. As well, an increase in standby revenue in the current period of US$810 per day, versus US$179 per day in the prior year, increased the dayrate.

Although Trinidad saw an improvement in dayrates, operating days and utilization decreased when compared to the prior year and the prior quarter.  Total operating days decreased to 4,789 days in the quarter, compared to 5,547 days in the fourth quarter of 2011 and 5,038 days in the third quarter of 2012. The decrease in operating days was mainly related to a decline in customer demand for the Company's lower specification equipment, a result of declining oil prices and reduced capital spending.

Operating income - net percentage in the current period was 40.0%, down from 43.4% in the same quarter last year as a result of reduced activity levels in the Company's lower specification and lower technological equipment which reduced operating revenue in the quarter. In addition, operating income - net percentage was negatively impacted by higher repairs and maintenance costs as the Company took the opportunity to perform work on rigs that had been working consistently for a number of years. Labour costs also increased due to timing delays on customer drilling programs. When compared to the third quarter of 2012, operating income - net percentage increased from 37.5% as a result of a change in rig mix. In the current quarter, a higher proportion of the division's modern, technically-advanced rigs were working, which tend to generate higher margins.

The Company's barge rigs continued to show strong operating conditions in the fourth quarter of 2012. Dayrates improved in the period when compared to the prior quarter and the fourth quarter of 2011. Utilization and operating days were fairly consistent in each of the quarters mentioned above, showing the continued demand for Trinidad's expertise in barge drilling.

Full Year 2012

Trinidad's US and international operations performed strongly throughout 2012 when compared to the same period of the prior year. However, softening market conditions were reflected in reduced operating days during the third and fourth quarters of 2012. While the shift in industry demand reduced Trinidad's activity levels, total revenues still outperformed the previous year due to Trinidad's fleet of in-demand, higher specification equipment, combined with the high concentration of long-term, take-or-pay contracts.

Solid industry demand for Trinidad's modern, high performance equipment led to strong dayrates throughout the current year. Dayrates peaked in the second quarter of 2012 and stayed relatively stable for the remainder of the year, averaging US$22,285 per day in 2012, up US$3,132 per day from the previous year. Higher dayrates in 2012 led to record operating revenue generation of $499.9 million in the current year, a 12.2% increase over the prior year. Although Trinidad's technically advanced equipment continued to produce strong dayrates, the lower specification rigs, which make up a small portion of the fleet, showed a slow-down in operations. For the year ended December 31, 2012, Trinidad recorded an impairment expense on these lower specification rigs of $64.8 million.

The full impact of dayrate increases was not reflected in the operating income - net percentage as a portion of the increase was related to higher crew wages, which are passed onto the operator at cost. In addition, in the current year, the Company recorded higher standby revenue versus the prior year, which increased dayrates as revenue is incurred with no associated operating days. Overall, dayrates were higher by US$978 per operating day related to standby revenues in the current year versus US$96 per operating day in the prior year. Trinidad experienced an increased level of standby revenue in 2012 compared to 2011 as weaker commodity prices caused producers to reduce activity and re-evaluate capital programs.

Although revenues remained strong, operating income - net percentage declined slightly in the current year when compared to the prior year. As rigs previously drilling dry gas became available, customers chose to high grade their equipment, resulting in reduced activity levels in the Company's lower specification equipment. In addition, operating income - net percentage was negatively impacted by higher repair and maintenance costs as the Company took the opportunity to perform work on rigs that had been working consistently for a number of years. Labor costs also increased due to timing delays on customer drilling programs, particularly in the second half of the year. In addition, Trinidad is adapting to a shift in customer activity among plays, which has had a slightly negative impact on margins due to shorter well drilling times and more move days. Lastly, in the first half of 2011, Trinidad received one-time demobilization revenue that positively impacted operating income.

Utilization in 2012 was lower than the levels experienced in 2011 with activity levels declining gradually throughout the year. As in the Canadian operations, the Company experienced weaker utilization for its spot market and lower specification equipment in 2012. Slower activity levels were largely driven by reduced capital spending by producers and uncertainty in relation to current and future commodity prices. However, as the majority of Trinidad's fleet is composed of high performance equipment with a high level of long-term contracts, the Company expects to have a limited exposure to the impact of the weaker activity levels as the decline has been more prevalent in the lower technology equipment.

Trinidad increased its number of land drilling rigs by four during the current period. Two rigs were delivered into the US operations in each of the first two quarters of 2012; each of these rigs were purchased externally and retrofitted to meet the Company's specifications. All four rigs delivered into service in 2012 were delivered into the Niobrara shale area in Wyoming on three-year, take-or-pay contracts.

The Company's barge drilling operations continued to perform well, with year-over-year dayrate increases.  Higher dayrates for these operations are a reflection of the solid demand and limited supply of high quality equipment in this sector.  Higher dayrates were slightly offset by a decrease in operating days in the current period due to weather delays in the third quarter of 2012.

QUARTER ANALYSIS

FINANCIAL HIGHLIGHTS - QUARTERLY ANALYSIS

                 
   2012   2011 
($ millions except per share data and operating data)  Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1 
Revenue 209.6 215.1 174.3 260.4 231.1 202.8 154.9 229.4
Operating income (1) 77.8 80.6 66.4 104.4 89.0 81.7 52.9 84.9
Operating income percentage (1) 37.1% 37.5% 38.1% 40.1% 38.5% 40.3% 34.2% 37.0%
Operating income - net percentage (1) 39.7% 40.0% 40.0% 43.5% 41.6% 43.0% 36.7% 40.5%
Net earnings (loss) for the year (12.4) 20.0 12.9 34.5 25.3 30.2 5.0 16.0
Adjustments for:                
  Depreciation and amortization  29.2 30.4 25.8 28.1 29.1 28.6 25.4 29.6
  Foreign exchange  (1.4) 0.8 (0.7) 0.5 2.4 (6.1) (1.2) 1.8
  Loss (gain) on sale of property and equipment  (11.5) - (0.5) 0.2 (0.6) (0.1) (5.3) -
  Impairment of property and equipment  70.1 1.3 - 7.5 - - 9.0 -
  Finance costs  10.1 10.3 10.5 10.8 10.9 10.9 10.5 12.4
  Income taxes  (22.2) 2.7 4.4 10.2 4.8 6.4 (3.4) 5.9
  Other  1.4 2.9 1.0 0.1 2.5 (0.5) (0.9) 4.0
  Income taxes paid  (2.0) (1.1) (0.7) (0.7) - (4.5) (0.9) (2.4)
  Income taxes recovered  0.7 3.9 - - 0.8 1.5 - 0.2
  Interest paid  (1.1) (19.5) (1.5) (19.8) (1.6) (21.4) (3.3) (3.1)
Funds provided by operations (1) 60.9 51.7 51.2 71.4 73.6 45.0 34.9 64.4
Net earnings (loss) per share (diluted) (0.10) 0.17 0.11 0.29 0.21 0.25 0.04 0.13
Funds provided by operations per share (diluted) 0.50 0.43 0.42 0.59 0.61 0.37 0.29 0.53
                 
(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

                 
   2012   2011 
($ millions except per share data and operating data)   Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1 
EBITDA (1)   63,323   64,715  53,081  91,240  69,545  76,016  41,164  63,814
  Per share (diluted) (2) 0.52 0.54 0.44 0.75 0.58 0.63 0.34 0.53
Adjusted EBITDA (1)   63,332   68,388  53,344  91,951  74,401  69,382  39,069  69,624
  Per share (diluted) (2) 0.52 0.57 0.44 0.76 0.62 0.57 0.32 0.58
Adjusted net earnings (1)   57,807   24,913  13,129  42,698  30,174  23,535  11,903  21,799
  Per share (diluted) (2) 0.48 0.21 0.11 0.35 0.25 0.19 0.10 0.18
                

(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, the number of shares issuable pursuant to the Incentive Option Plan.

OPERATING HIGHLIGHTS - QUARTERLY ANALYSIS

                   
     2012   2011 
     Q4   Q3   Q2   Q1   Q4   Q3   Q2   Q1 
Land Drilling Market                 
Operating days (1)                
   Canada  2,915 3,233 1,288 4,107 3,665 3,675 1,646 4,359
   United States and International 4,789 5,038 5,289 5,262 5,547 5,579 5,170 5,088
Rate per operating day (2,3)                
   Canada (CDN$) 26,190 23,501 25,343 24,206 23,652 20,315 20,796 20,459
   United States and International (CDN$) 22,305 22,518 22,586 21,935 20,710 18,600 18,470 17,815
   United States and International (US$) 22,589 22,263 22,616 21,698 20,387 19,143 19,095 17,878
Utilization rate - operating day (4)                
   Canada  56% 62% 26% 84% 74% 74% 34% 87%
   United States and International 77% 81% 86% 90% 92% 92% 89% 90%
   Utilization rate for service rigs (5) - - - - - - 34% 66%
Number of drilling rigs at quarter end                
   Canada  59 57 55 54 54 54 54 55
   United States and International 68 68 68 66 64 66 65 63
   Number of service rigs at quarter end (5) - - - - - - - 22
   Number of coring and surface casing rigs at quarter end 15 20 20 20 20 20 20 20
                   
Barge Drilling Market                 
   Operating days (1) 386 376 429 364 373 454 436 445
   Rate per operating day (CDN$) (2,3) 29,954 30,008 29,072 25,448 25,835 24,833 22,680 22,004
   Rate per operating day (US$) (2,3) 30,330 29,583 29,106 25,204 25,455 25,547 23,441 22,083
   Utilization rate - operating day (4) 84% 82% 94% 80% 81% 99% 96% 99%
   Number of barge drilling rigs at quarter end  2 2 2 2 2 2 2 2
   Number of barge drilling rigs under Bareboat Charter at quarter end  3 3 3 3 3 3 3 3
                   

 

(1) Operating days include drill days and move days.
(2) Rate per operating day is based on operating revenue divided by operating days.
(3) Operating revenue is presented net of third party costs.
(4) Utilization rate - operating day is based on operating days divided by total days available.
(5) In the second quarter of 2011, Trinidad disposed of its 22 well servicing rigs and related equipment.

FINANCIAL SUMMARY

       
As at December 31, December 31,  
($ thousands) 2012 2011  $ Change 
Working capital (1) 109,412 139,829 (30,417)
         
Current portion of long-term debt 617 580 37
Long-term debt (2) 509,215 580,167 (70,952)
Total long-term debt 509,832 580,747 (70,915)
Total long-term debt as a percentage of assets 33.1% 36.1%  
         
Total assets   1,541,294 1,608,126 (66,832)
Total long-term liabilities 585,629 666,717 (81,088)
Total long-term liabilities as a percentage of assets 38.0% 41.5%  
         
Shareholders' equity 863,849 841,226 22,623
Total debt to shareholders' equity 59.0% 69.0%  
         

 

(1) See Non-GAAP Measures Definition section of this document for further details.
(2) Long-term debt is net of associated transaction costs.

For the year ended December 31, 2012, working capital decreased by $30.4 million compared to 2011 due to a decrease in current assets of $38.8 million and a decrease in current liabilities of $8.4 million. The decrease in current assets was mainly a result of a reduction in receivables due to lower activity levels in the fourth quarter of 2012 versus the prior year. In addition, current assets decreased due to lower inventory reflecting a decrease in the level of rig construction and a write down of inventory at the end of the current period, as well as a decrease in assets held for sale as items have been sold or re-classified during the period; these were offset by an increase in cash at period end.

The decrease in current liabilities during the period was mainly a result of a decrease in bank indebtedness due to the Company being in a net positive cash position at December 31, 2012, as well as a decrease in payables due to lower activity levels in the fourth quarter of 2012 versus the prior year, which was offset slightly by an increase in deferred revenue related to delay and early termination revenues accrued in the current period.

Trinidad's total long-term debt balance declined by $70.9 million during the current year when compared to the year ended December 31, 2011. The reduction in debt was due to a decrease in the value of the Senior Notes as well as a decrease in the revolving debt balances at year end. The decline in debt is in line with the Company's core objective of sustainable growth, in conjunction with leverage reduction.

The value of Senior Notes decreased by $7.6 million as a result of the change in the US dollar foreign exchange rate at December 31, 2012. The Senior Notes are translated at each quarter end, as such their value will fluctuate quarterly 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.

Trinidad's total long-term debt balance decreased by an additional $62.8 million as a result of payments made on the outstanding revolving debt. At December 31, 2012, Trinidad had $50.0 million outstanding on its Canadian revolving credit facility and US$20.0 million on its US revolving credit facility, leaving $150.0 million and US$80.0 million unutilized in the facility, respectively.  The Canadian and US revolving facility requires 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 Consolidated EBITDA ratio (see table below). The facility matures on December 16, 2016, and is subject to annual extensions of an additional year on each anniversary.  The remaining change in long-term debt is related to building loans, which decreased by $0.6 million due to payments made in the current year.

A total of $185.7 million of capital expenditures were spent during the year ended December 31, 2012, compared to $182.2 million for the same period in the prior year.  Capital expenditures were substantially related to the Company's rig build program as the Company delivered five rigs into service in the Canadian operations and four into service in the US operations in the current year, as well as continuing construction on two additional new builds expected to be delivered into the Canadian operations in the first half of 2013. In addition, the Company completed rig upgrades with the addition of moving systems as well as additional pumps and top drives to the existing rig fleet to meet customer demand.

Trinidad expects cash provided by operations and the Company's various sources of financing to be sufficient to meet its debt repayments, future obligations and to fund planned capital expenditures. Trinidad's 2013 capital program is expected to total between $70 million and $80 million. The capital program includes the completion of two contracted rigs for the Canadian operations carried over from the 2012 capital program, maintenance capital and select upgrade capital to improve the efficiency and marketability of specific existing equipment.

Current financial performance is well in excess of the financial ratio covenants under the revolving credit facility as reflected in the table below under IFRS:

           
RATIO December 31, December 31,   THRESHOLD
    2012 2011    
           
Consolidated Senior Debt to Consolidated EBITDA (1)  0.27:1   0.59:1     3.00:1 maximum 
Consolidated Total Debt to Consolidated EBITDA (1)  1.91:1   2.42:1     4.00:1 maximum 
Consolidated EBITDA to Consolidated Cash Interest Expense (1)  6.76:1   5.74:1     2.75:1 minimum 
           
           

 

(1) Please see the Non-GAAP Measures Definition section of this document for further details.

Readers are cautioned that the ratios noted above do not have standardized meanings prescribed in IFRS.

OUTLOOK

Looking forward into 2013 and beyond, Trinidad continues to see a level of volatility for commodity prices and global economic demand for oil and natural gas. What has become clearer is the increased awareness of the benefits of high-performance drilling equipment. Demand and pricing have remained relatively stable across North America for modern, high-performance equipment, while older style, conventional rigs have been more impacted by lower activity levels and weaker pricing.

Trinidad's largely high-specification fleet remains in demand; however, in order to maintain its position as a leader in the industry and to satisfy its customers' requests, the Company needs to continually upgrade its equipment. In 2013, Trinidad expects to focus its capital spending on adding automation and efficiency to its existing fleet. Trinidad expects to upgrade rigs by

  • adding moving systems that will allow more rigs to walk between wells while pad drilling;
  • adding automated pipe handling systems to rigs that don't have them;
  • increasing mud pumping capacity to allow rigs to perform efficiently in a number of challenging plays across North America; and
  • performing general upgrades to increase the performance and efficiency of the equipment.

These upgrades are typically done in conjunction with an extended contract and an increased day rate that allows Trinidad to recoup its capital investment. If market conditions warrant and contract terms meet the Company's internal hurdle rates, it may add a small number of new builds to its capital program in 2013.

Trinidad's strategy of growing EBITDA through selective growth opportunities and efficiently run operations while also paying down debt will continue in 2013. The Company's long-term goal is to maintain a debt to EBITDA level of approximately 1.5 times and it is very close to achieving this goal. Over the past few years, Trinidad's ability to generate significant free cash flow has become a lot clearer. Achieving its capital structure target means the Company will be able to take advantage of more opportunities to add value for its shareholders going forward. These opportunities may take the form of growth in existing operations, new areas of development or international expansion opportunities. Looking further out, the Company sees added upside potential if some of the liquefied natural gas plants planned for the west coast of Canada are built or if natural gas prices strengthen. In addition, Trinidad will review other avenues for adding shareholder value and utilizing its growing level of free cash flow, such as dividend payments and share buy-back programs.

Trinidad expects that industry conditions will remain relatively stable in 2013 with producers adjusting capital spending programs in relation to commodity price levels. The Company expects that its modern, high performance equipment will continue to be in demand but that unless commodity prices increase there will be limited demand for lower specification equipment.

With a high level of in-demand equipment and long-term contracts, a more diversified customer base and growing financial flexibility, Trinidad is well positioned to perform strongly and capitalize on opportunities for growth in 2013 and beyond.

CONFERENCE CALL

A conference call and webcast to discuss the results will be held for the investment community on Thursday March 7th, 2013 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 2:00 p.m. ET on March 7th, 2013 until midnight March 14th, 2013 by dialing (855) 859 2056 or (416) 849-0833 and entering replay access code 97019283.

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, coring and barge-drilling sectors of the North American oil and natural gas industry with operations in Canada, the United States 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  December 31, December 31,
($ thousands) 2012 2011
     
Assets    
Current Assets    
Cash and cash equivalents 4,933 -
Accounts receivable  182,071 207,143
Inventory 8,600 17,523
Prepaid expenses 4,808 6,298
Assets held for sale 816 9,048
  201,228 240,012
     
Property and equipment 1,253,921 1,279,826
Intangible assets and goodwill 86,145 88,288
  1,541,294 1,608,126
     
Liabilities    
Current Liabilities    
Bank indebtedness - 4,600
Accounts payable and accrued liabilities  82,265 88,960
Dividends payable 6,043 6,043
Deferred revenue 2,891 -
Current portion of long-term debt 617 580
  91,816 100,183
     
Long-term debt 509,215 580,167
Deferred income taxes 76,414 86,550
  677,445 766,900
     
Shareholders' Equity    
Common shares 952,043 952,043
Contributed surplus 50,245 49,462
Accumulated other comprehensive loss (34,403) (25,377)
Deficit (104,036) (134,902)
  863,849 841,226
  1,541,294 1,608,126
     

 

     
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the years ended December 31,  
   
($ thousands except per share data) 2012 2011
     
Revenue    
Oilfield service revenue 859,133 817,005
Other revenue 194 1,145
  859,327 818,150
Expenses     
Operating expense 530,176 509,663
General and administrative 57,545 61,150
Depreciation and amortization 113,527 112,711
Foreign exchange  (753) (3,202)
Gain on sale of property and equipment (11,841) (5,978)
Impairment of property and equipment 78,853 8,993
  767,507 683,337
Finance costs 41,662 44,670
Earnings before income taxes 50,158 90,143
Income taxes     
Current 1,282 2,566
Deferred  (6,162) 11,096
  (4,880) 13,662
Net earnings 55,038 76,481
     
Other comprehensive income (loss)    
  Foreign currency translation adjustment, net of income tax (9,026) 4,653
  (9,026) 4,653
Total comprehensive income  46,012 81,134
     
Earnings per share    
Net earnings    
  Basic / Diluted 0.46 0.63

 

           
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For years ended December 31, 2012 and 2011
 
 
 
($ thousands)
 
 
Common
shares
 
 
Contributed
surplus
Accumulated 
other 
comprehensive
income (loss) (1)
 
Retained
earnings
(deficit)
 
 
Total
equity
Balance at December 31, 2011 952,043 49,462 (25,377) (134,902) 841,226
Share-based payments - 783 - - 783
Total comprehensive income (loss) - - (9,026) 55,038 46,012
Dividends - - - (24,172) (24,172)
Balance at December 31, 2012 952,043 50,245 (34,403) (104,036) 863,849
             
Balance at January 1, 2011 951,863 49,016 (30,030) (187,211) 783,638
Exercise of stock options 180 (48) - - 132
Share-based payments - 494 - - 494
Total comprehensive income (loss) - - 4,653 76,481 81,134
Dividends - - - (24,172) (24,172)
Balance at December 31, 2011 952,043 49,462 (25,377) (134,902) 841,226
             

(1) Accumulated other comprehensive income (loss) consisted of foreign currency translation adjustment.

     
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 
($ thousands) 2012 2011
     
Cash provided by (used in)    
Operating activities    
Net earnings 55,038 76,481
Adjustments for:    
  Depreciation and amortization  113,527 112,711
  Foreign exchange (753) (3,202)
  Gain on sale of property and equipment  (11,841) (5,978)
  Impairment of property and equipment  78,853 8,993
  Finance costs  41,662 44,670
  Income taxes  (4,880) 13,662
  Other  5,398 5,091
  Income taxes paid  (4,491) (7,928)
  Income taxes recovered  4,640 2,580
  Interest paid  (41,924) (29,439)
  Interest received  11 48
Funds provided by operations 235,240 217,689
Change in non-cash operating working capital 23,765 (29,872)
Cash provided by operations 259,005 187,817
     
Investing activities    
Purchase of property and equipment (185,718) (182,206)
Proceeds from disposition of property and equipment 22,519 46,553
Change in non-cash working capital 690 (3,746)
Cash used by investing (162,509) (139,399)
     
Financing activities    
Proceeds from long-term debt 170,555 91,263
Repayments of long-term debt (233,259) (129,474)
Proceeds from exercise of options - 130
Dividends paid (24,172) (24,171)
Financing costs (373) (1,587)
Cash used by financing (87,249) (63,839)
     
Cash flow from operating, investing and financing activities 9,247 (15,421)
Effect of translation of foreign currency cash 286 2,916
Increase (decrease) in cash for the year 9,533 (12,505)
     
(Bank indebtedness) cash and cash equivalents - beginning of year (4,600) 7,905
Cash and cash equivalents (bank indebtedness) - end of year 4,933 (4,600)
     

 

SEGMENTED INFORMATION

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

           
Three months ended 
December 31, 2012
 ($ thousands) 
 
  Canadian
  Operations 
  United States /
  International 
  Operations
  Inter- 
  segment
  Eliminations
 
 
 Corporate 
 
 
 Total 
Operating revenue  77,577 118,398 - - 195,975
 Other revenue  120 8 - - 128
 Third party recovery  9,840 3,614 - - 13,454
 Inter-segment revenue  124 - (124) - -
  87,661 122,020 (124) - 209,557
 Operating costs  47,308 71,037 - - 118,345
 Third party costs  9,840 3,614 - - 13,454
 Inter-segment operating  124 - (124) - -
 Operating income  30,389 47,369 - - 77,758
 Depreciation and amortization  9,645 19,499 - - 29,144
 (Gain) loss on sale of property and equipment  (11,284) (262) - - (11,546)
 Impairment of property and equipment  6,811 63,233 - - 70,044  
  5,172 82,470 - - 87,642
 Segmented income  25,217 (35,101) - - (9,884)
 General and administrative  - - - 15,903 15,903
 Foreign exchange  - - - (1,468) (1,468)
 Finance costs  - - - 10,076 10,076
 Income taxes  - - - (22,149) (22,149)
 Net earnings (loss) 25,217 (35,101) - (2,362) (12,246)
           
 Purchase of property and equipment  30,622 5,982 - - 36,604
           
Three months ended 
December 31, 2011
 ($ thousands) 
 
  Canadian
  Operations 
  United States /
  International 
  Operations
  Inter- 
  segment
  Eliminations
 
 
 Corporate 
 
 
 Total 
Operating revenue  89,250 124,522 - - 213,772
 Other revenue  132 (19) - - 113
 Third party recovery  12,909 4,312 - - 17,221
 Inter-segment revenue  13,723 - (13,723) - -
  116,014 128,815 (13,723) - 231,106
 Operating  54,459 70,450 - - 124,909
 Third party costs  12,909 4,312 - - 17,221
 Inter-segment operating  13,723 - (13,723) - -
 Operating income  34,923 54,053 - - 88,976
 Depreciation and amortization  9,061 20,055 - - 29,116
 (Gain) loss on sale of property and equipment  (435) (127) - - (562)
 Impairment of property and equipment  - - - - -
  8,626 19,928 - - 28,554
 Segmented (loss) income  26,297 34,125 - - 60,422
 General and administrative  - - - 17,028 17,028
 Foreign exchange  - - - 2,403 2,403
 Finance costs  - - - 10,904 10,904
 Income taxes  - - - 4,769 4,769
 Net earnings (loss) 26,297 34,125 - (35,104) 25,318
           
 Purchase of property and equipment  10,838 55,360 - - 66,198
           
For the year ended 
December 31, 2012
 ($ thousands) 
 
  Canadian
  Operations 
  United States /
  International 
 Operations 
  Inter- 
  segment
  Eliminations
 
 
 Corporate 
 
 
 Total 
Operating revenue  303,500 499,852 - - 803,352
 Other revenue  414 (220) - - 194
 Third party recovery  37,539 18,242 - - 55,781
 Inter-segment revenue  9,622 - (9,622) - -
  351,075 517,874 (9,622) - 859,327
 Operating costs  177,111 297,284 - - 474,395
 Third party costs  37,539 18,242 - - 55,781
 Inter-segment operating  9,622 - (9,622) - -
 Operating income  126,803 202,348 - - 329,151
 Depreciation and amortization  35,017 78,510 - - 113,527
 (Gain) loss on sale of property and equipment  (11,060) (781) - - (11,841)
 Impairment of property and equipment  14,058 64,795 - - 78,853
  38,015 142,524 - - 180,539
 Segmented income  88,788 59,824 - - 148,612
 General and administrative  - - - 57,545 57,545
 Foreign exchange  - - - (753) (753)
 Finance costs  - - - 41,662 41,662
 Income taxes  - - - (4,880) (4,880)
 Net earnings (loss)  88,788 59,824 - (93,574) 55,038
           
 Purchase of property and equipment  119,005 66,713 - - 185,718
           
For the year ended 
December 31, 2011
 ($ thousands) 
 
  Canadian
  Operations 
  United States /
  International 
 Operations
  Inter- 
  segment
  Eliminations
 
 
Corporate
 
 
 Total 
Operating revenue  310,935 445,526 - - 756,461
 Other revenue  823 322 - - 1,145
 Third party recovery  43,767 16,777 - - 60,544
 Inter-segment revenue  56,573 - (56,573) - -
  412,098 462,625 (56,573) - 818,150
 Operating costs  188,695 260,424 - - 449,119
 Third party costs  43,767 16,777 - - 60,544
 Inter-segment operating  56,573 - (56,573) - -
 Operating income  123,063 185,424 - - 308,487
 Depreciation and amortization  35,583 77,128 - - 112,711
 (Gain) loss on sale of property and equipment  (4,597) (1,381) - - (5,978)
 Impairment of property and equipment  1,535 7,458 - - 8,993
  32,521 83,205 - - 115,726
 Segmented income  90,542 102,219 - - 192,761
 General and administrative  - - - 61,150 61,150
 Foreign exchange  - - - (3,202) (3,202)
 Finance costs  - - - 44,670 44,670
 Income taxes  - - - 13,662 13,662
 Net earnings (loss)  90,542 102,219 - (116,280) 76,481
           
 Purchase of property and equipment  42,966 139,240 - - 182,206
           

ADVISORY

CHANGE IN PRESENTATION

In the first quarter of 2012, the calculation of dayrates was changed to be based on operating revenue divided by operating days (drilling days plus move days), and now excludes third party recovery revenue as well as other income. Previously, only drilling days were included in the dayrate calculation. Furthermore, the Company began including additional disclosure in regards to utilization, adding utilization rate - operating day which is based on operating days instead of the previously disclosed drilling day based utilization. The change in presentation of dayrates and utilization better aligns the Company's disclosure with its peers, and its management measurement tools.  Furthermore, the change allows the users of the financial statements a higher degree of disclosure.  See "Non-GAAP Measures Definitions" for calculations.  The changes in presentation have been applied retrospectively.

CHANGES IN ACCOUNTING POLICY

Effective December 31, 2012, Trinidad adopted IFRS 11 - Joint Arrangements. Due to this adoption, Trinidad reviewed the assessment of whether control exists in relation to certain barge rigs operated through a charter agreement. Trinidad has determined that a joint arrangement exists based on the venturers meeting the joint control definition per the standard over the operations of the barge rigs included in this joint agreement. As a joint arrangement under IFRS 11, Trinidad recognized their portion of operations related to the joint arrangement in their respective accounts.

Additionally, in accordance with the requirements of early application of IFRS 11, Trinidad has early adopted IFRS 10 - Consolidated Financial Statements and IFRS 12 - Disclosures of interests in other entities. There were no material changes related to the implementation of IFRS 10 and IFRS 12.

All changes have been applied retrospectively. Refer to the investor relations page of Trinidad's website www.trinidaddrilling.com for detailed disclosure of changes for prior periods.

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, Adjusted EBITDA, Adjusted net earnings, working capital, Senior Debt to EBITDA, Total Debt to EBITDA, EBITDA to Cash Interest Expense, drilling days, operating days, utilization rate - drilling day, utilization rate - operating day, and rate per operating day.  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, amortized and impaired, 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 and share-based payment expense, and is not intended to represent net earnings as calculated in accordance with IFRS.

"Adjusted net earnings" is used by management and the investment community to analyze net earnings prior to the effect of foreign exchange, share-based payments and impairment charges and is not intended to represent net earnings as calculated in accordance with IFRS.

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

"Senior Debt to EBITDA" is defined as the consolidated balance of the revolving facility and other debt secured by a lien at quarter end to consolidated EBITDA for the trailing 12 months (TTM).  Consolidated EBITDA used in this financial ratio is calculated as EBITDA plus share-based payments and unrealized foreign exchange.

"Total Debt to 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 EBITDA for the TTM.  Consolidated EBITDA used in this financial ratio is calculated as EBITDA plus share-based payments and unrealized foreign exchange.

"EBITDA to Cash Interest Expense" is defined as the consolidated EBITDA for TTM to the cash interest expense on all debt balances for TTM.  Consolidated EBITDA used in this financial ratio is calculated as EBITDA plus share-based payments 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" 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. 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.  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.  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 divided by revenue net of third party costs.

FORWARD-LOOKING STATEMENTS

The 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. 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 Ciulka,
Vice President, Investor Relations
(403) 294-4401
email:  lciulka@trinidaddrilling.com

Organization Profile

Trinidad Drilling Ltd.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890