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AKITA Drilling Ltd

AKITA announces third quarter results and net income of $1.1 million for the quarter

CALGARY, AB , Nov. 4, 2024 /CNW/ - AKITA Drilling Ltd.(TSX: AKT.A)

AKITA Drilling Ltd. ("AKITA" or the "Company") announces results for the nine months ended September 30, 2024.

The Company's net income decreased to $1,106,000 in the third quarter of 2024 from $3,880,000 during the same period of 2023. Adjusted funds flow from operations decreased to $8,435,000 in the third quarter of 2024, from $10,566,000 in the same period of 2023. Results in the third quarter of 2024 were down compared to the same period of 2023 due to reduced operating margin per day in the Company's Canadian division due to rig mix and reduced activity in the US division.

Net cash from operations increased to $6,458,000 for the three months ended September 30, 2024, compared to $2,308,000 in the same period of 2023, due to the positive change in non-cash working capital. Total debt decreased to $55,551,000 at the end of the third quarter of 2024 from $79,223,000 at the same time in 2023.

In contrast to the continuing decrease in the US industry active rig count, AKITA's US active rig count increased through the quarter, from 8 rigs at the start of July to 12 active rigs at the end of September, equivalent to 80% utilization compared to a utilization rate of 40% for the industry as a whole at the end of the quarter. A similar increase occurred in Canada where AKITA's active rig count increased from 9 rigs at the start of the quarter to 12 rigs at the end of the quarter, equivalent to 71% utilization compared to 57% in the Canadian industry at quarter end.

Colin Dease, AKITA's Chief Executive Officer stated: "We are extremely proud of the debt repayment we have achieved year to date and of our success in reactivating rigs in the US despite challenging market conditions. With 12 active rigs in each division, our activity is now strong and balanced between Canada and the US, and we anticipate a strong fourth quarter for the Company."

CONSOLIDATED FINANCIAL HIGHLIGHTS

($Thousands except per share amounts)


For the three months ended September 30, 

For the nine months ended September 30, 


2024

2023

Change

 % Change

2024

2023

Change

 % Change

Revenue



45,828

54,813

(8,985)

(16 %)

130,469

178,162

(47,693)

(27 %)

Operating and maintenance expenses


35,727

41,387

(5,660)

(14 %)

99,044

128,801

(29,757)

(23 %)

Operating margin



10,101

13,426

(3,325)

(25 %)

31,425

49,361

(17,936)

(36 %)

Margin %



22 %

24 %

(2 %)

(8 %)

24 %

28 %

(4 %)

(14 %)













Net cash from operating activities


6,458

2,308

4,150

180 %

24,318

18,044

6,274

35 %













Adjusted funds flow from operations(1)


8,435

10,566

(2,131)

(20 %)

26,080

38,346

(12,266)

(32 %)

  Per share



0.21

0.27

(0.06)

(22 %)

0.66

0.97

(0.31)

(32 %)













Net income (loss)



1,106

3,880

(2,774)

(71 %)

3,254

19,580

(16,326)

(83 %)

  Per share



0.03

0.10

(0.07)

(70 %)

0.08

0.49

(0.41)

(84 %)













Capital expenditures


7,378

4,566

2,812

62 %

18,439

11,770

6,669

57 %













Weighted average shares outstanding


39,734

39,650

84

0 %

39,728

39,650

78

0 %













Total assets



251,486

267,061

(15,575)

(6 %)

251,486

267,061

(15,575)

(6 %)

Total debt



55,551

79,223

(23,672)

(30 %)

55,551

79,223

(23,672)

(30 %)

(1) See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. 


Canadian Drilling Division

$Thousands except per day amounts

2024

2023

Change 

% Change

2024

2023

Change 

% Change

Revenue Canada



14,842

15,104

(262)

(2 %)

40,211

44,237

(4,026)

(9 %)

Revenue from joint venture drilling rigs

11,038

11,099

(61)

(1 %)

33,185

27,990

5,195

19 %

Flow through charges(1)


(855)

(3,117)

2,262

73 %

(2,539)

(5,126)

2,587

50 %

Adjusted revenue Canada (1)


25,025

23,086

1,939

8 %

70,857

67,101

3,756

6 %












Operating and maintenance
expenses Canada

11,577

10,226

1,351

13 %

30,057

32,621

(2,564)

(8 %)












Operating and maintenance expenses from joint venture drilling rigs

7,989

8,641

(652)

(8 %)

23,250

21,015

2,235

11 %

Flow through charges(1)


(855)

(3,117)

2,262

73 %

(2,539)

(5,126)

2,587

50 %

Adjusted operating and maintenance expenses Canada (1) 

18,711

15,750

2,961

19 %

50,768

48,510

2,258

5 %












Adjusted operating margin Canada (1)

6,314

7,336

(1,022)

(14 %)

20,089

18,591

1,498

8 %












Margin %(1)



25 %

32 %

(7 %)

(22 %)

28 %

28 %

0 %

0 %












Operating days



698

583

115

20 %

1,819

1,774

45

3 %












Adjusted revenue per operating day(1)

35,852

39,599

(3,747)

(9 %)

38,954

37,825

1,129

3 %

Adjusted operating and maintenance
 expenses per operating day(1)

26,807

27,015

(208)

(1 %)

27,910

27,345

565

2 %

Adjusted operating margin per operating day(1)

9,045

12,584

(3,539)

(28 %)

11,044

10,480

564

5 %












Utilization(1)



38 %

32 %

6 %

19 %

33 %

32 %

1 %

3 %












Rig count



17

20

(3)

(15 %)

17

20

(3)

(15 %)

(1)  See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. 


During the third quarter of 2024, AKITA achieved 698 operating days in Canada, which corresponds to a utilization rate of 38%, compared to 32% (583 days) in the third quarter of 2023, and compared to an industry average of 49%. AKITA's single and double rigs had a combined increase of 184 operating days in the third quarter of 2024 when compared to the same period in 2023. This was offset by fewer operating days for AKITA's oilsands triple rigs in the quarter. AKITA lagged industry utilization in the quarter as the Company's ramp up after spring breakup was pushed further into the quarter than expected due to operator delays. At the end of the third quarter 2024, AKITA was at 71% utilization compared to industry utilization of 57%. Although activity increased in the quarter when compared to the prior year, the adjusted operating margin in Canada decreased to $6,314,000 in 2024 compared to $7,336,000 in the same period of 2023.

Adjusted revenue per operating day led to the decrease in adjusted operating margin in Canada, despite increased activity. In the third quarter of 2024, adjusted revenue per day decreased to $35,852 from $39,599 in the third quarter of 2023. This decline resulted from a change in the mix of rigs operating, with a higher concentration of high-margin rigs working in the third quarter of 2023. Adjusted operating and maintenance expenses per operating day decreased slightly to $26,807 in the third quarter of 2024, from $27,015 in the same period of 2023. This decrease, similar to the change in revenue per day, is the result of the change in rig mix but is offset by escalating costs including labour, maintenance and other ancillary costs.

United States Drilling Division




For the three months ended September 30, 

For the nine months ended September 30, 

$Thousands except per day amounts

2024

2023

Change 

% Change

2024

2023

Change 

% Change

Revenue US



30,986

39,709

(8,723)

(22 %)

90,258

133,925

(43,667)

(33 %)

Flow through charges(1)


(3,310)

(4,355)

1,045

24 %

(10,652)

(13,427)

2,775

21 %

Adjusted revenue US (1)


27,676

35,354

(7,678)

(22 %)

79,606

120,498

(40,892)

(34 %)












Operating and maintenance expenses US

24,150

31,161

(7,011)

(22 %)

68,987

96,180

(27,193)

(28 %)

Flow through charges(1)


(3,310)

(4,355)

1,045

24 %

(10,652)

(13,427)

2,775

21 %

Adjusted operating and maintenance expenses US (1) 

20,840

26,806

(5,966)

(22 %)

58,335

82,753

(24,418)

(30 %)












Adjusted operating margin US (1)

6,836

8,548

(1,712)

(20 %)

21,271

37,745

(16,474)

(44 %)

Margin %(1)



25 %

24 %

1 %

4 %

27 %

31 %

(4 %)

(13 %)












Operating days



713

908

(195)

(21 %)

2,056

3,041

(985)

(32 %)












Adjusted revenue per operating day(1)

38,816

38,936

(120)

(0 %)

38,719

39,624

(905)

(2 %)












Adjusted operating and maintenance expenses per operating day(1)

29,229

29,522

(293)

(1 %)

28,373

27,212

1,161

4 %

Adjusted operating margin per operating day(1)

9,587

9,414

173

2 %

10,346

12,412

(2,066)

(17 %)












Utilization(1)



52 %

66 %

(14 %)

(21 %)

50 %

74 %

(24 %)

(32 %)












Rig count



15

15

-

0 %

15

15

-

0 %

(1)  See "Non-GAAP and Supplementary Financial Measures" near the end of this release for further detail. 


In the US, the active rig count declined from 650 average active rigs in the third quarter of 2023, to 601 active rigs at the start of 2024 and then further declined to 566 active rigs at the end of the third quarter of 2024. AKITA's active rig count initially followed a similar pattern, dropping from an average of 12 active rigs in the third quarter of 2023 to an average of 9.5 active rigs in the third quarter of 2024, however ending the quarter at 12 active rigs.  Operating days decreased from 908 operating days in the third quarter of 2023 to 713 operating days in the third quarter of 2024.

This reduction in activity resulted in adjusted operating margin decreasing to $6,836,000 in the third quarter of 2024, from $8,548,000 in the same period of 2023.

Adjusted operating and maintenance expense per operating day decreased slightly to $29,229 per day in the third quarter of 2024, from $29,522 in the third quarter of 2023, changing 1% quarter-over-quarter despite increasing costs throughout the industry.

Adjusted operating margin per operating day increased 2% for third quarter of 2024, compared to the same period for 2023.  This is a combination of a slight decrease in adjusted revenue per operating day, offset by a larger decrease in adjusted operating margin per operating day.

FURTHER INFORMATION

This news release shall be used as preparation for reading the full disclosure documents. AKITA's unaudited interim condensed consolidated financial statements and management's discussion and analysis for the quarter ended September 30, 2024 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.

Non-GAAP and Supplementary Financial Measures

Non-GAAP Financial Measures

Adjusted Revenue and Adjusted Operating and Maintenance Expenses

Revenue and operating and maintenance expenses in AKITA's Canadian operating segment include revenue and expenses from AKITA's wholly-owned drilling rigs as well as its share of joint venture revenue and expenses.

Excluded from the revenue and expenses in AKITA's Canadian and US operating segment are flow through charges that are billed to operators and repaid to the Company. The volume and timing of the flow through charges can artificially impact the operational per day analysis and as a result management and certain investors may find the comparability between periods is improved when these flow through charges are excluded from revenue per day and operating and maintenance expense per day. The flow through charges do not have any impact on the Company's net earnings as the amounts offset each other.

Adjusted Funds Flow from Operations

Adjusted funds flow from operations is not a recognized GAAP measure under IFRS and readers should note that AKITA's method of determining adjusted funds flow from operations may differ from methods used by other companies, and includes cash flow from operating activities before working capital changes, equity income from joint ventures, and income tax amounts paid or recovered during the period.  Nonetheless, management and certain investors may find adjusted funds flow from operations to be a useful measurement to evaluate the Company's operating results at year-end and within each year, since the seasonal nature of the business affects the comparability of non-cash working capital changes both between and within periods.

$Thousands

For the three months ended
September 30,

For the nine months ended
September 30,


2024

2023

2024

2023

Net cash from operating activities

6,458

2,308

24,318

18,044

Interest paid

935

1,340

3,320

5,049

Interest expense

(984)

(1,393)

(3,467)

(5,208)

Post-employment benefits paid

78

78

236

243

Equity income from joint ventures

2,918

2,361

9,592

6,696

Change in non-cash working capital

(970)

5,872

(7,919)

13,522

Adjusted funds flow from operations

8,435

10,566

26,080

38,346

Non-GAAP Ratios

"Adjusted funds flow from operations per share" is calculated on the same basis as net loss per class A and class B share basic and diluted, utilizing the basic and diluted weighted average number of class A and class B shares outstanding during the periods presented.

"Adjusted revenue per operating day" may be useful to analysts, investors, other interested parties and management as a measure of pricing strength and is calculated by dividing adjusted revenue by the number of operating days for the period.

"Adjusted operating and maintenance expenses per operating day" may be useful to analysts, investors, other interested parties and management as it demonstrates a degree of cost control and provides a proxy for specific inflation rates incurred by the Company

FORWARD-LOOKING INFORMATION:

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. In particular, forward-looking information in this news release includes, but is not limited to, references to the outlook for the drilling industry (including activity levels and day rates), the Company's relationships and customers and vendors, advantages associated with the percentage of pad drilling rigs in the Company's Canadian drilling fleet, the renewal of drilling contracts, and debt repayment.

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.

Although the Company believes that the expectations reflected in the forward-looking information are reasonable based on the information available on the date such statements are made and processes used to prepare the information, such statements are not guarantees of future performance and no assurance can be given that these expectations will prove to be correct. By their nature, these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and therefore carry the risk that the predictions and other forward-looking statements will not be realized.  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.

The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of, among other things, prevailing economic conditions; the level of exploration and development activity carried on by AKITA's customers, world crude oil prices and North American natural gas prices; global liquefied natural gas (LNG) demand, weather, access to capital markets; and government policies.  We caution that the foregoing list of factors is not exhaustive and that while relying on forward-looking statements to make decisions with respect to AKITA, investors and others should carefully consider the foregoing factors, as well as other uncertainties and events, prior to making a decision to invest in AKITA.  Except where required by law, the Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by it or on its behalf

SOURCE AKITA Drilling Ltd.