Akita Prioritizes Debt Reduction and Announces Second Quarter Results

Source Press Release
Company Akita Drilling Ltd 
Tags Strategy - Corporate
Date July 31, 2019

AKITA's Board of Directors has elected to suspend the Company's dividends on its Class A Non-Voting and Class B Common Shares in light of the Company's desire to pay down its debt.

The Company's debt repayment plan includes the suspension of dividends as well as a continuing focus on cost cutting and other monetization and cash generating strategies.  

During the second quarter of 2019 AKITA achieved 1,008 operating days in the US, compared to only 136 operating days in the US over the same period in 2018.  In Canada, however, results were much weaker than in the prior year as operating days decreased by 50% to 274 days in 2019 compared to 548 in 2018.  This translated to a consolidated net loss for the three months ended June 30, 2019 of $5,067,000 (or $0.13 per share) compared to a net loss of $2,959,000(or $0.16 per share) for the corresponding period in 2018.

In the second quarter of 2019, AKITA's fleet of 17 rigs in the US generated the majority of the Company's revenue, 79% up from 19% in the same period of 2018. Despite a reduction in activity in the US for the industry and AKITA between the first quarter of 2019 and the second quarter of 2019, demand and activity in the US remain far stronger than in Canada.

Karl Ruud, AKITA's President and Chief Executive Officer stated: "Given the current market conditions in Canada, and softening in the US, Akita's highest priority is debt reduction through continuing our focus on cost controls and integration benefits. This discipline will leave Akita ideally positioned to take advantage of growth opportunities."

CONSOLIDATED FINANCIAL HIGHLIGHTS

($ thousands except per share amounts)  For the three months ended June 30,    For the six months ended June 30, 
  2019  2018  Change   % Change  2019  2018  Change   % Change 
Adjusted revenue (1)  40,765  21,016  19,749  94%  93,971  55,487  38,484  69% 
Adjusted operating and 
maintenance expenses (1) 
28,820  15,200  13,620  90%  62,830  40,850  21,980  54% 
Operating margin(1)  11,945  5,816  6,129  105%  31,141  14,637  16,504  113% 
Margin %(1)  29%  28%  1%  4%  33%  26%  7%  27% 
                 
EBITDA(1)  3,179  1,701  1,478  87%  12,301  6,139  6,162  100% 
  Per share  0.08  0.09  (0.01)  (11%)  0.31  0.34  (0.03)  (9%) 
                 
Adjusted funds flow from 
operations(1) 
1,559  1,638  (79)  (5%)  9,386  6,157  3,229  52% 
  Per share  0.04  0.09  (0.05)  (56%)  0.24  0.34  (0.10)  (29%) 
                 
Net loss  (5,067)  (2,959)  (2,108)  (71%)  (6,536)  (4,870)  (1,666)  (34%) 
  Per share  (0.13)  (0.16)  0.03  19%  (0.17)  (0.27)  0.10  37% 
                 
Capital expenditures  6,759  2,320  4,439  191%  7,782  4,005  3,777  94% 
Dividend declared  3,367  1,525  1,842  121%  6,734  3,050  3,684  121% 
Weighted average shares 
outstanding 
39,608  17,946  21,662  121%  39,608  17,946  21,662  121% 
                 
Total assets  391,162  192,894  198,268  103%  391,162  192,894  198,268  103% 
Total debt  84,271  84,271  n/a  84,271  84,271  n/a 

(1) See "Non-GAAP Items". 

CONSOLIDATED OPERATIONAL HIGHLIGHTS

  For the three months ended June 30,  For the six months ended June 30, 
  2019  2018  Change  % Change  2019  2018  Change  % Change 
Operating days(1)                 
Canada  274  548  (274)  (50%)  878  1,681  (803)  (48%) 
United States  1,008  136  872  641%  2,148  177  1,971  1114% 
                 
Revenue per operating day(1)               
Canada(2)  31,518  31,018  500  2%  31,141  29,935  1,206  4% 
United States  31,874  29,544  2,330  8%  31,019  29,192  1,827  6% 
                 
Operating and maintenance per operating day(1)               
Canada(2)  21,515  22,071  (556)  (3%)  21,268  21,451  (183)  (1%) 
United States  22,743  22,831  (88)  (0%)  20,557  27,068  (6,511)  (24%) 
                 
Utilization (1)                 
Canada  13%  24%  (11%)  (45%)  21%  37%  (16%)  (43%) 
United States(3)  65%  50%  15%  30%  70%  39%  31%  79% 

(1) See "Non-GAAP Items". 
(2) Includes AKITA's share of Joint Venture revenue and expenses. See "Non-GAAP Items". 
(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

AKITA's 1,008 operating days in the US equated to utilization of 65% in the second quarter of 2019 compared to 136 operating days and 50% utilization in the same period of 2018. In the second quarter of 2019, 15 of AKITA's 17 US based rigs operated, compared to two rigs operating in 2018 in the same quarter. Revenue from AKITA's US division increased to $32,129,000 in the second quarter of 2019 from $4,018,000 in the same period of 2018.  In the second half of 2019, the focus for the Company in the US will be to consolidate operations into higher demand basins, further cost rationalization, improving margins and exploring additional opportunities.

Canadian Drilling Division

In Canada, results were much weaker than in the prior year as utilization decreased to 13% (274 operating days) in the second quarter of 2019 from 24% (548 operating days) in the second quarter of 2018. Revenue in the Canadian division decreased to $8,636,000 in the second quarter of 2019 from $16,998,000 in the second quarter of 2018. Regulated production cuts, pipeline access and political and regulatory uncertainty are all weighing heavily on the Canadian energy industry, which in turn is negatively affecting drilling activity.  Activity levels in Canada declined sharply in the fourth quarter of 2018 and this has persisted through the first half of 2019.  AKITA does not anticipate a change to this low demand environment without an improvement in the factors mentioned above.

Source: EvaluateEnergy® ©2020 EvaluateEnergy Ltd