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Akita Drilling Ltd Cl.A NV (AKT-A-T) Quote - Press Release

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AKITA's Acquisition of Xtreme Results in Improved Performance in the First Quarter of 2019

CNW Group - Wed May 1, 7:23PM CDT

AKITA Drilling Ltd. (TSX:AKT-A.TO)

AKITA's September 11, 2018 acquisition of US based Xtreme Drilling Corp. ("Xtreme") and the strategy to integrate the two companies into one premium pure play drilling company with operations in Canada and the US is proving to be successful. The realization of corporate synergies is on track to meet targets. Post-acquisition, AKITA commands a total fleet of 40 rigs, comprised of 17 rigs in its US fleet and 23 rigs in its Canadian fleet.

AKITA announced that adjusted funds flow from operations for the quarter ended March 31, 2019 increased 73% to $7,828,000 compared to $4,519,000 in the corresponding quarter of 2018. AKITA's improved results in the first quarter of 2019, when compared to the same period in 2018, are directly attributable to the Company's acquisition of Xtreme in the fall of 2018, increasing its US fleet from just 2 rigs in Q1 of 2018 to 17 rigs in Q1 of 2019. During the first quarter of 2019 AKITA achieved 1,140 operating days in the US. In Canada, however, results were much weaker than in the prior year as operating days dropped by 47% to 604 days in 2019 compared to 1,133 in 2018. These results translated to a consolidated net loss for the three months ended March 31, 2019 of $1,470,000 (or $0.04 per share) compared to a net loss of $1,912,000 (or $0.11 per share) for the corresponding period in 2018.

Karl Ruud, AKITA's President and Chief Executive Officer stated: "During the quarter, AKITA continued executing its plan to optimize performance, through cost control, operational excellence and continued dedication to safety, across its recently expanded US operational division and existing Canadian operations."

United States Drilling Division

AKITA's 1,140 operating days in the US equated to utilization of 74% in the first quarter of 2019 compared to 43 operating days and 23% utilization in the same period of 2018. The delta between the US results in 2019 compared to 2018 is attributable to the aforementioned Xtreme acquisition. In the first quarter of 2019, 16 of AKITA's 17 US based rigs operated compared to only two rigs operating in 2018 in the same quarter. Revenue from AKITA's US division increased to $34,500,000 in the first quarter of 2019 from $1,150,000 in the same period of 2018. With oil prices increasing from the dramatic decrease in the fourth quarter of 2018, AKITA is optimistic about its investment in its US operations. In 2019, the focus for the Company in the US will be on consolidation of operations into higher demand basins, cost rationalization, improving margins and exploring additional opportunities.

United States Drilling Division Results

For the three months ended March 31,                                                                               2019     2018

    ---                                                                                                                                  ---


            $ Thousands (CAD) except per day amounts



            Revenue                                                                                                          34,500    1,150



            Operating and maintenance expense                                                                                21,232    1,686

    ---                                                                                                                                  ---


            Operating income                                                                                                 13,268    (536)


    Margin %                                                                                                                   38%   (47%)





            Operating days                                                                                                    1,140       43





            Revenue per operating day(1)                                                                                     30,263   26,744



            Operating and maintenance per operating day(1)                                                                   18,625   39,209





            Utilization (2)                                                                                                     75%     24%





            Rig count                                                                                                            17        2






              (1)See "Non-GAAP Items".




              (2)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.

Canadian Drilling Division

In Canada, results were much weaker than in the prior year as utilization decreased to 29% (604 operating days) in the first quarter of 2019 from 48% (1,133 operating days) in the first quarter of 2018. Revenue in the Canadian division decreased to $18,706,000 in the first quarter of 2019 from $33,322,000 in the first 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 affecting drilling activity. Activity levels in Canada declined sharply in the fourth quarter of 2018 and this has persisted into the first quarter of 2019. AKITA does not anticipate a change to this low demand environment without an improvement in the factors mentioned above.

Canadian Drilling Division Results

For the three months ended March 31,                                                                              2019   2018

    ---                                                                                                                               ---


             $Thousands except per day amounts



            Revenue(1)                                                                                                      18,706 33,322



            Operating and maintenance expense(1)                                                                            12,778 23,964

    ---                                                                                                                               ---


            Operating income                                                                                                 5,928  9,358


    Margin %                                                                                                                  32%   28%





            Operating days                                                                                                     604  1,133





            Revenue per operating day(1)(2)                                                                                 30,970 29,410



            Operating and maintenance per operating day(1)(2)                                                               21,156 21,151





            Utilization                                                                                                        29%   48%





            Rig count                                                                                                           23     26




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






                (2)See "Non-GAAP Items"

Corporate

On May 1(st), 2019 AKITA declared a second quarter dividend for 2019 of eight and one half cents ($0.085) per Class A Non-Voting and Class B Common Shares.

CONSOLIDATED FINANCIAL HIGHLIGHTS

($ thousands except per share amounts)



            For the three months ended March 31,                                                                   2019     2018

    ---                                                                                                                      ---


            Adjusted revenue(1)                                                                                  53,206   34,472



            Adjusted operating and maintenance expenses (1)                                                      34,010   25,650

    ---                                                                                                                      ---


            Operating income                                                                                     19,196    8,822


    Margin %                                                                                                       36%     26%





            EBITDA(2)                                                                                             9,121    4,437



            Per share                                                                                              0.23     0.25





            Adjusted funds flow from operations(2)                                                                7,828    4,519



            Per share                                                                                              0.20     0.25





            Net loss                                                                                            (1,470) (1,912)



            Per share                                                                                            (0.04)  (0.11)





            Capital expenditures                                                                                  1,023    1,685



            Dividend declared                                                                                     3,367    1,525



            Weighted average shares outstanding                                                                  39,608   17,946





            Total assets                                                                                        407,448  207,911




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




                (2)See "Non-GAAP Items".

CONSOLIDATED OPERATIONAL HIGHLIGHTS

For the three
                months ended March
                31,                                 2019         2018

    ---                                                          ---



                Operating days(1)



              Canada                   604        1,133


                              United States          1,140           43




                            Revenue per operating day(1)



              Canada(2)             30,970       29,410


                              United States         30,263       26,744




                            Operating and maintenance expense per
                             operating day(1)



              Canada(2)             21,156       21,151


                              United States         18,625       39,209






                Utilization (1)



              Canada                   29%         48%


                              United States(3)         75%         24%






                (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.

FURTHER INFORMATION

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

NON-GAAP ITEMS

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 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 first quarter Management's Discussion & Analysis.

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.

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.

View original content to download multimedia: http://www.newswire.ca/en/releases/archive/May2019/01/c8547.html

SOURCE: AKITA Drilling Ltd.

INVESTOR INQUIRIES: Darcy Reynolds CPA, CA, Vice President, Finance and Chief
Financial Officer, (403) 292-7530

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