AKITA Drilling Ltd. ("the Company") moved an AC pad heavy double drilling rig out of Canada to the Permian Basin in January of 2020, bringing the Company's total rig count in the US to 18 rigs with 13 rigs located in the Permian Basin area where the Company's presence continues to grow. The Company is now working 15 of its 18 US based rigs and has secured a book of approximately 3,500 contracted days in 2020, primarily with major operators holding significant land positions in the Permian Basin. Karl Ruud, AKITA's President and Chief Executive Officer stated: "Building on AKITA's consolidation strategy to relocate rigs to the Permian Basin in 2019, the Company now operates 13 rigs in the area and is striving to improve financial results in 2020".
The Company announces annual results for the year ended December 31, 2019. Revenue increased by 49% to $175,890,000 in 2019 from $118,361,000 in 2018, operating margin increased 71% to $54,302,000 in 2019 compared to $31,786,000 in 2018 and adjusted EBITDA increased to $19,131,000 in 2019 up from $16,447,000 in 2018. The Company's net loss increased to $19,875,000 ($0.50 per share) from a net loss of $15,939,000 ($0.65 per share) in 2018.
The Company's US operating segment started 2019 with 16 out of 17 rigs operating. However, demand began to fall near the end of the first quarter as many operators decreased capital budgets, which translated to a decline in activity for the industry and for AKITA and negatively affected earnings. Results in the US division were also impacted by AKITA executing its strategic plan to move rigs to more active basins in order to consolidate operations, which resulted in both short-term reductions in activity and one-time move costs. Despite this decline in activity, the Company's US division generated 72% of the Company's 2019 revenue, up from 45% in 2018.
In Canada, 2019 results were significantly below 2018 as decreased activity in Canada was driven by a lack of take-away capacity, production curtailments and general uncertainty over the future of the Canadian market, all of which contributed towards sustained low dayrates and had a significant impact on the Company's oil sands and heavy oil drilling operations, which are the Canadian division's primary market. In response to the continued weak Canadian market conditions, the Company reduced its Canadian labour and overhead to realign its cost structure commensurate with the reduced level of Canadian activity.
CONSOLIDATED FINANCIAL HIGHLIGHTS
($ thousands except per share amounts)
Adjusted funds flow from operations(1)
Weighted average shares outstanding
CONSOLIDATED OPERATIONAL HIGHLIGHTS
Revenue per operating day(1)
Operating and maintenance per operating day(1)
(2)Includes AKITA's share of Joint Venture revenue and expenses.
(3)Utilization in the US is a weighted average for the year based on the number of days each rig was physically in the US and owned by the Company.
United States Drilling Division
Activity in the US totaled 3,747 operating days in 2019 compared to 1,783 in 2018. This 110% increase in operating days is attributable to the drilling rigs acquired through the Xtreme acquisition working for the Company for a full year in 2019, as opposed to 2018 where the acquired rigs were only included from September 12 to December 31. Revenue in the US was $127,514,000 for 2019 (2018 – $53,368,000), equal to 72% of the Company's total revenue. Revenue increased as a direct result of increased activity as did operating expenses, which increased to $87,023,000 in 2019 from $38,029,000 in 2018. Operating margin per operating day increased by 26% in 2019 to $10,806 from $8,603 in 2018. This increase in operating margin per operating day is a result of higher day rates. Operating costs increased to $23,225 in 2019 from $21,239 in 2018 as a result of one time move costs incurred as part of the Company's strategic plan to consolidate operations.
Canadian Drilling Division
Activity in Canada, for AKITA and the industry, decreased in 2019 from 2018 due to infrastructure constraints and uncertainty over the future of the Canadian market which affected the capital spending of Canadian oil and gas companies. Activity was also impacted by lower average WTI prices. During 2019, AKITA achieved 1,606 operating days in Canada, which corresponds to an annual utilization rate of 19%, compared a 2019 industry average of 23%, and to 2018 utilization of 33% (2,800 days). Canadian revenue, which includes AKITA's share of joint venture activities of $53,665,000 in 2019 was 39% lower than 2018 revenue of $87,790,000, due to decreased activity in 2019. Through a greater percentage of higher specification rigs working, revenue per day increased by 7% in 2019 to $33,415 per day from $31,354 per day in 2018.
This news release shall be used as preparation for reading the full disclosure documents. AKITA's audited consolidated financial statements and management's discussion and analysis for the year ended December 31, 2019 will be available on the AKITA website (www.akita-drilling.com) or via SEDAR (www.sedar.com) or can be requested in print from the Company.
This news release references Non-GAAP (Generally Accepted Accounting Principles) items. Revenue per operating day, operating and maintenance expense per operating day, adjusted revenue, adjusted operating and maintenance expense, EBITDA and adjusted funds flow from operations are all considered Non-GAAP items. Management feels that these Non-GAAP items are useful in assessing the Company's performance. These terms do not have standardized meanings prescribed under International Financial Reporting Standards (IFRS) and may not be comparable to similar measures used by other companies. For further information, see "Basis of Analysis in this MD&A and Non-GAAP Items" in AKITA's 2019 December 31, 2019 Management's Discussion & Analysis.
Certain statements contained in this news release may constitute forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "plan", "estimate", "expect", "may", "will", "intend", "should", and similar expressions.
Forward-looking information involves 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.
The Company's actual results could differ materially from those anticipated in this forward-looking information as a result of regulatory decisions, competitive factors in the industries in which the Company operates, prevailing economic conditions, and other factors, many of which are beyond the control of the Company.
The Company believes that the expectations reflected in the forward-looking information are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.
Any forward-looking information contained in this news release represents the Company's expectations as of the date hereof, and is subject to change after such date. The Company disclaims any intention or obligation to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required by applicable securities legislation.
SOURCE AKITA Drilling Ltd.
For further information: INVESTOR INQUIRIES: Darcy Reynolds, CPA, CA, Vice President, Finance and Chief Financial Officer, (403) 292-7530
AKITA is a premier oil and gas drilling contractor with a fleet of 37 drilling rigs. AKITA provides drilling services through two geographical segments: Canada and the United States (“US”). With a fleet of 20 drilling rigs, AKITA’s Canadian division operates in Alberta,...