CALGARY, Oct. 30, 2014 /CNW/ - AKITA Drilling Ltd.'s
net income for the three months ended September 30, 2014 was $3,854,000 ($0.21
per share) on revenue of $36,556,000
compared to $3,540,000 ($0.20 per share) on revenue of $33,096,000 for the corresponding period in
2013. Funds flow from operations for the quarter ended
September 30, 2014 was $10,942,000 compared to $11,300,000 in the corresponding quarter in
2013.
Net income for the nine months ended September 30, 2014 was $16,085,000 ($0.90
basic earnings per share / $0.89
diluted earnings per share) on revenue of $119,263,000. Comparative figures for 2013
were net income of $18,793,000
($1.05 basic earnings per share /
$1.04 diluted earnings per share) on
revenue of $122,181,000. Funds
flow from operations for the January to September period in 2014
was $39,216,000 compared to
$40,406,000 for the comparative
period in 2013.
Rig activity increased during the third quarter of 2014 to 1,519
operating days or 45.0% utilization compared to 1,347 operating
days or 38.6% utilization during the third quarter of 2013.
This increase was attributable to improved market conditions for
conventional double and triple sized rigs. By contrast,
AKITA's pad rigs were less active than during the corresponding
period in 2013.
During the quarter, the Company completed construction of and
deployed its first slant pad drilling rig. Management
anticipates that this rig will provide AKITA with access to new
opportunities in heavy oil drilling. The Company expects to
have three additional pad rigs in service prior to year-end: an
ultra-deep new build, a new pad double rig purchased earlier this
year that is being refitted for the Canadian market and an existing
pad triple rig that is being upgraded.
Although the recent decline in crude oil prices has not had a
material impact on rig activity management anticipates that a
prolonged decline may slow demand for rigs targeting oil
prospects. While crude oil drilling potential is influenced
by the price of crude oil, natural gas drilling potential continues
to be tied to the establishment of FIDs (final investment
decisions) by selected operators to invest in major west coast
development for LNG (liquified natural gas) projects. AKITA
remains well positioned with its fleet of pad rigs to be a
significant supplier for any related drilling opportunities.
Selected information from AKITA Drilling Ltd.'s Management's
Discussion and Analysis from the Quarterly Report is as
follows:
Basis of Analysis in this MD&A, Non-Standard and
Additional GAAP Items
The Company reports its joint venture activities in the
financial statements in accordance with International Financial
Reporting Standards ("IFRS"), IFRS 11 "Joint Arrangements". In
determining the classification of its joint arrangements, AKITA
considers whether the joint arrangements are structured through
separate vehicles, if the legal form of the separate vehicles
confers upon the parties direct rights to assets and obligations
for liabilities relating to the arrangements, whether the
contractual terms between the parties confer upon them rights to
assets and obligations for liabilities relating to the
arrangements, as well as if other facts and circumstances lead to
rights to assets and obligations for liabilities being conferred
upon the parties to the arrangement prior to concluding that
AKITA's joint ventures are classified as joint ventures rather than
joint operations. Under IFRS 11, AKITA is required to report its
joint venture assets, liabilities and financial activities using
the equity method of accounting. However, for purposes of analysis
in this MD&A, the proportionate share of assets, liabilities
and financial activities is included as non-standard GAAP
information ("Adjusted") where appropriate. The Company provides
the same drilling services and utilizes the same management,
financial and reporting controls for its joint venture activities
as are in place for its wholly owned operations. None of AKITA's
joint ventures are individually material in size when considered in
the context of AKITA's overall operations.
Operating margin, revenue per operating day, operating and
maintenance expense per operating day and operating margin per
operating day are not recognized measures under IFRS. Management
and certain investors may find operating margin data to be a useful
measurement metric as it provides an indication of the
profitability of the business prior to the influence of
depreciation, overhead expenses, financing costs and income taxes.
Management and certain investors may find "per operating day"
measures for revenue and operating margin indicate pricing strength
while operating and maintenance expense per operating day
demonstrates the degree of cost control and provides a proxy for
specific inflation rates incurred by the Company. Readers should be
cautioned that in addition to the foregoing, other factors,
including the mix of rigs between conventional and pad and singles,
doubles and triples can also impact these results. Readers should
also be aware that AKITA includes standby revenue, construction
revenue and construction costs in its determination of "per
operating day" results.
Funds flow from operations is considered as an additional GAAP
measure under IFRS. AKITA's method of determining funds flow from
operations may differ from methods used by other companies and
includes cash flow from operating activities before working capital
changes. Management and certain investors may find 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.
Revenue and
Operating & Maintenance Expenses
|
|
|
|
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
|
|
|
|
|
|
|
|
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Revenue per Interim
Financial Statements (1)
|
36.6
|
33.1
|
3.5
|
11%
|
119.3
|
122.2
|
(2.9)
|
(2%)
|
Proportionate Share
of Revenue from Joint Ventures (2)
|
13.8
|
12.0
|
1.8
|
15%
|
47.9
|
36.2
|
11.7
|
32%
|
Adjusted Revenue
(2)
|
50.4
|
45.1
|
5.3
|
12%
|
167.2
|
158.4
|
8.8
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
|
|
|
|
|
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Operating &
Maintenance
|
25.1
|
21.6
|
3.5
|
16%
|
78.7
|
77.6
|
1.1
|
1%
|
Expenses per
Interim
|
Financial Statements
(1)
|
|
|
|
|
|
|
|
|
Proportionate Share
of
|
|
|
|
|
|
|
|
Operating &
Maintenance Expenses from Joint
|
9.4
|
7.6
|
1.8
|
24%
|
30.7
|
21.9
|
8.8
|
40%
|
Ventures
(2)
|
Adjusted Operating
& Maintenance Expenses (2)
|
34.5
|
29.2
|
5.3
|
18%
|
109.4
|
99.5
|
9.9
|
10%
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
|
|
|
|
|
|
|
|
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Adjusted Revenue
(2)
|
50.4
|
45.1
|
5.3
|
12%
|
167.2
|
158.4
|
8.8
|
6%
|
Adjusted Operating
& Maintenance Expenses (2)
|
34.5
|
29.2
|
5.3
|
18%
|
109.4
|
99.5
|
9.9
|
10%
|
Adjusted Operating
Margin(1)(2)(3)
|
15.9
|
15.9
|
0.0
|
0%
|
57.8
|
58.9
|
(1.1)
|
(2%)
|
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
|
|
|
|
|
|
|
|
|
$Dollars
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Adjusted Revenue per
Operating Day (2)
|
33,139
|
33,460
|
(321)
|
(1%)
|
34,457
|
35,158
|
(701)
|
(2%)
|
Adjusted Operating
&
|
|
|
|
|
|
|
|
|
Maintenance
Expenses
|
22,708
|
21,678
|
1,030
|
5%
|
22,542
|
22,094
|
448
|
2%
|
per Operating Day
(2)
|
Adjusted Operating
Margin per Operating Day (2)(3)
|
10,431
|
11,782
|
(1,351)
|
(11%)
|
11,915
|
13,064
|
(1,149)
|
(9%)
|
(1)
|
Revenue, operating & maintenance
expenses and adjusted operating margin include the Company's rig
construction for third parties. AKITA does not disclose its
operating margin on rig construction activity separately for
competitive reasons.
|
|
|
(2)
|
Proportionate share of
revenue from joint ventures, adjusted revenue, proportionate share
of operating & maintenance expenses from joint ventures,
adjusted operating & maintenance expenses, adjusted operating
margin, adjusted revenue per operating day, adjusted operating
& maintenance expenses per operating day and adjusted operating
margin per operating day are non-standard accounting measures. See
commentary in "Basis of Analysis in this MD&A, Non-Standard and
Additional GAAP Items".
|
|
|
(3)
|
Adjusted operating margin is the
difference between adjusted revenue and adjusted operating &
maintenance expenses.
|
Third Quarter Comparatives –
Lower Operating Margins Diminish the Impact of Increased Activity
Levels
During the third quarter of 2014, adjusted revenue increased to
$50,338,000 from $45,071,000 during the third quarter of 2013 as a
result of increased rig activity, particularly for AKITA's
conventional doubles and triples.
Although adjusted revenue for the three month period ended
September 30, 2014 increased,
adjusted revenue per operating day decreased to $33,139 during the third quarter of 2014 from
$33,460 in the comparative quarter in
2013 due to an increased proportion of the Company's revenue being
generated by its conventional drilling rigs versus pad rigs as well
as due to lower day rates for certain of AKITA's pad rigs.
Pad rigs, compared to conventional rigs, typically generate higher
revenue on a "per day" basis.
Adjusted operating and maintenance costs are tied to revenue and
amounted to $34,494,000 ($22,708 per operating day) during the third
quarter of 2014 compared to $29,200,000 ($21,678 per operating day) in the same period of
the prior year. While conventional rigs figured more
prominently in the drilling activities during the current quarter
compared to the third quarter of 2013, the actual mix of rigs
resulted in higher operating costs when taken on a "per operating
day" basis.
The adjusted operating margin for the Company decreased to
$15,844,000 ($10,431 per operating day) in the third quarter
of 2014 from $15,871,000
($11,782 per operating day) during
the corresponding quarter of 2013. During the third quarter
of 2014, a higher proportion of conventional rigs worked compared
to the third quarter of 2013 when more pad rigs operated.
This change in rig mix resulted in both lower overall average day
rates and lower operating margins than during the corresponding
period in 2013. Higher activity levels in the third quarter
of 2014 compared to the corresponding period in 2013 were not
sufficient to offset these changes.
Year-to-Date Comparatives –
Improvements in the Second and Third Quarters Partially Offset
Weakness Encountered in First Quarter
During the first nine months of 2014, adjusted revenue increased
to $167,153,000 from $158,424,000 during the comparative nine month
period of 2013 as a result of strengthening market conditions for
conventional double and triple sized rigs. Pad rig activity
had a number of program delays which were most pronounced during
the third quarter.
Although adjusted revenue for the year-to-date period ended
September 30, 2014 increased,
adjusted revenue per operating day decreased to $34,457 during the first nine months of 2014 from
$35,158 in the comparative period in
2013 due to the same factors that affected third quarter adjusted
revenue per operating day.
Adjusted operating and maintenance costs are tied to revenue and
amounted to $109,352,000
($22,542 per operating day) during
the first nine months of 2014 compared to $99,554,000 ($22,094 per operating day) in the same period of
the prior year.
The adjusted operating margin for the Company decreased to
$57,801,000 in the first nine months
of 2014 from $58,870,000 during the
corresponding period of 2013. This reduction occurred during
the first quarter of 2014 due to a reduction in standby revenue as
well as the change in rig mix (i.e. there was a higher percentage
of activity generated by conventional rigs during the first quarter
of 2014 compared to the corresponding quarter in 2013).
During the second and third quarters of 2014, this decline in
adjusted operating margin was partially offset by stronger market
conditions.
Other Comments
From time to time, the Company requires customers to make
pre-payments prior to the provision of drilling services. In
addition, from time to time, the Company records cost recoveries
related to capital enhancements for specific customer related
projects. At September 30, 2014,
deferred revenue related to these activities totalled $364,000 (September 30,
2013 - $498,000).
Depreciation and Amortization Expense
|
Three Months Ended
September 30
|
Nine Months Ended September 30
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Depreciation
and Amortization
Expense
|
7.1
|
6.5
|
0.6
|
9%
|
22.2
|
19.5
|
2.7
|
14%
|
The increase in depreciation and amortization expense to
$7,088,000 during the third quarter
of 2014 from $6,502,000 during the
corresponding quarter in 2013 was largely attributable to an
increase in the average cost base for AKITA's rigs as well as an
increase in drilling activity by AKITA's conventional rigs.
Depreciation and amortization expense for the first nine months
of 2014 totalled $22,208,000 compared
to $19,524,000 for the corresponding
period in 2013. As with the depreciation and amortization
expense for the third quarter, both an increase in drilling
activity as well as a higher average cost base per rig resulted in
depreciation and amortization expense being 14% higher in the first
nine months of 2014 versus the comparative period in 2013. In the
first nine months of 2014, drilling rig depreciation accounted for
96% of total depreciation and amortization expense (2013 -
96%).
While AKITA conducts many of its drilling operations via joint
ventures, the drilling rigs used to conduct those activities are
owned jointly by AKITA and its joint venture partners, and not the
joint ventures themselves. Therefore, the joint ventures do not
hold any property, plant, or equipment assets directly.
Consequently, the depreciation balance reported above includes
depreciation on assets involved in both wholly owned and joint
ventured activities.
Selling and Administrative Expense
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Selling &
Administrative
|
4.0
|
4.3
|
(0.3)
|
(7%)
|
14.1
|
13.7
|
0.4
|
3%
|
Expense
per
|
Interim Financial
Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proportionate Share of
Selling
|
|
|
|
|
|
|
|
|
& Administrative
Expense
|
0.1
|
0.1
|
0.0
|
N/A
|
0.8
|
0.3
|
0.5
|
167%
|
from Joint Ventures
(1)
|
Adjusted Selling &
Administrative Expense (1)
|
4.1
|
4.4
|
(0.3)
|
(7%)
|
14.9
|
14.0
|
0.9
|
6%
|
(1)
|
Proportionate share of
selling and administrative expense from joint ventures and adjusted
selling and administrative expense are non-standard accounting
measures. See commentary in "Basis of Analysis in this MD&A,
Non-Standard and Additional GAAP Items".
|
Adjusted selling and administrative expenses were 8.8% of
adjusted revenue in the first nine months of 2014 compared to 8.7%
of adjusted revenue in the first nine months of 2013. The
increased selling and administrative costs were due to a
combination of personnel and non-personnel related costs including
computer system upgrades. The single largest component was salaries
and benefits, which accounted for 59% of these expenses in the
first nine months of 2014 (62% in 2013).
Equity Income from Joint Ventures
|
Three Months Ended
September 30
|
Nine
Months Ended September 30
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Proportionate Share
of Revenue from Joint Ventures (1)
|
13.8
|
12.0
|
1.8
|
15%
|
47.9
|
36.2
|
11.7
|
32%
|
Proportionate Share
of
|
|
|
|
|
|
|
|
|
Operating &
Maintenance Expenses from Joint
|
9.4
|
7.6
|
1.8
|
24%
|
30.7
|
21.9
|
8.8
|
40%
|
Ventures
(1)
|
|
|
|
|
|
|
|
|
Proportionate Share
of Selling
|
|
|
|
|
|
|
|
|
& Administrative
Expense
|
0.1
|
0.1
|
0.0
|
N/A
|
0.8
|
0.3
|
0.5
|
167%
|
from Joint Ventures
(1)
|
Equity Income from
Joint
Ventures
|
4.3
|
4.3
|
0.0
|
0%
|
16.6
|
14.0
|
2.6
|
19%
|
(1)
|
Proportionate share of
revenue from joint ventures, proportionate share of operating &
maintenance expenses from joint ventures and proportionate share of
selling & administrative expense from joint ventures are
non-standard accounting measures. See commentary in "Basis of
Analysis in this MD&A, Non-Standard and Additional GAAP
Items".
|
The Company provides the same drilling services and utilizes the
same management, financial and reporting controls for its joint
venture activities as are in place for its wholly owned operations.
The analyses of these activities are incorporated throughout the
relevant sections of this MD&A. Joint venture activities are
often located in some of the most prospective regions in
Canada. Two thirds of AKITA's joint ventures utilize pad
drilling rigs.
Other Income (Losses)
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Total Other Income
(Losses)
|
0.6
|
(0.0)
|
0.6
|
N/A
|
0.6
|
0.1
|
0.5
|
500%
|
The Company invests any cash balances in excess of its ongoing
operating requirements in bank guaranteed highly liquid
investments. Interest income decreased to $142,000 in the first nine months of 2014 from
$259,000 in the corresponding period
in 2013 as a result of reduced cash and short term deposit
balances. The Company has undertaken significant capital
expenditures related to the construction of new rigs and the
conversion of conventional rigs into pad rigs, thereby reducing
AKITA's cash balances. In addition to interest income, the Company
has recorded interest expense totalling $119,000 during the first nine months of 2014
(first nine months of 2013 - $81,000), primarily as a result of standby
charges for its lending facility.
During the third quarter of 2014, the Company disposed of an
older underutilized pad rig. Additionally, throughout the current
year, AKITA disposed of other non-core assets resulting in
year-to-date gains totalling $499,000. AKITA disposed of several minor assets
during the first nine months of 2013 resulting in $184,000 in gains.
During 2013 and 2014, the Company entered into forward foreign
exchange contracts in order to mitigate foreign exchange exposure
for capital purchases made outside of Canada. In that regard, AKITA recorded an
unrealized foreign currency gain of $402,000 during the third quarter of 2014 (YTD
2014 – unrealized foreign currency loss of $245,000). The balance reported as
"Net Other Losses" on the Interim Consolidated Statements of Net
Income and Comprehensive Income also includes realized foreign
exchange gains (YTD 2014 - $472,000),
unrealized losses on financial instruments (YTD 2014 - $155,000) and other gains (YTD 2014 -
$46,000).
Income Tax Expense
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Current Tax
Expense
|
0.9
|
0.4
|
0.5
|
125%
|
5.1
|
5.0
|
0.1
|
2%
|
Deferred Tax
Expense
|
0.4
|
1.0
|
(0.6)
|
(60%)
|
0.3
|
1.5
|
(1.2)
|
(80%)
|
Income Tax
Expense
|
1.3
|
1.4
|
(0.1)
|
(7%)
|
5.4
|
6.5
|
(1.1)
|
(17%)
|
Income tax expense decreased to $5,425,000 in the first nine months of 2014 from
$6,508,000 in the corresponding
period in 2013 due to lower pre-tax earnings. The completion of
major capital projects affects the portion of income taxes that are
deferred to future dates.
Net Income, Funds Flow and Net Cash From Operating
Activities
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
$Millions
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Net Income
|
3.9
|
3.5
|
0.4
|
11%
|
16.1
|
18.8
|
(2.7)
|
(14%)
|
Funds Flow from
Operations (1)
|
10.9
|
11.3
|
(0.4)
|
(4%)
|
39.2
|
40.4
|
(1.2)
|
(3%)
|
(1)
|
Funds
flow from operations is an additional GAAP measure
under IFRS. See commentary in "Basis of Analysis in this MD&A,
Non-Standard and Additional GAAP Items".
|
Net income attributable to shareholders increased to
$3,854,000 or $0.21 per Class A Non-Voting and Class B Common
Share (basic and diluted) for the three month period ended
September 30, 2014 from $3,540,000 or $0.20
per share (basic and diluted) in the comparative quarter of
2013. Funds flow from operations decreased to $10,942,000 in the third quarter of 2014
from $11,300,000 in the corresponding
quarter in 2013. Changes in quarterly net income that occurred in
the third quarter of 2014 compared to the corresponding quarter in
2013 were attributable to higher activity levels in the current
year as well as gains from asset sales and currency exchange rates
which were partially offset by lower margins and higher
depreciation charges. Funds flow from operations was not
affected by the aforementioned gains from asset sales and currency
movements or depreciation expense as these are all non-cash
items.
Net income decreased to $16,085,000 or $0.90 per Class A Non-Voting and Class B Common
Share (basic) ($0.89 - diluted) for
the first nine months of 2014 from $18,793,000 or $1.05 per share (basic) ($1.04 - diluted) in the corresponding period of
2013. Funds flow from operations decreased to $39,216,000 in the first nine months of 2014 from
$40,406,000 in the corresponding
period in 2013. Comparability of net income and funds flows
for these two periods were mostly affected by rig activity levels
(higher in 2014 on a year-to-date basis), operating margins per
operating day (lower in 2014 on a year-to-date basis) and
depreciation (higher in 2014 on a year-to-date basis).
Fleet and Rig Utilization
At September 30, 2014, AKITA had
36 drilling rigs, including 10 that operated under joint ventures,
(32.725 net to AKITA) compared to 38 rigs (35.725 net to AKITA) in
the corresponding period of 2013. At September 30, 2014, the Company had three
additional rigs under construction (3 net to AKITA). During the
third quarter of 2014, the Company disposed of one of its
underutilized pad rigs.
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
|
2014
|
2013
|
Change
|
% Change
|
2014
|
2013
|
Change
|
% Change
|
Operating
Days
|
1,519
|
1,347
|
172
|
13%
|
4,851
|
4,506
|
345
|
8%
|
Utilization
Rate
|
45.0%
|
38.6%
|
6.4
|
16%
|
47.7%
|
43.0%
|
4.7
|
11%
|
Liquidity and Capital Resources
Cash used for capital expenditures totalled $71,285,000 during the first nine months of 2014
(2013 - $27,892,000). The most
significant expenditures related to the following projects:
- ongoing construction of a new ultra-deep pad rig (scheduled to
commence its multi-year contract in the fourth quarter of
2014);
- completion of the conversion of a conventional rig into the
Company's first slant pad rig (this rig commenced operations during
the third quarter of 2014);
- purchasing and refitting of a new pad rig to enable it to
operate in Canada (completion of
the refit is scheduled for the fourth quarter of 2014 at which time
the rig will operate under a one-year initial contract);
- upgrading a pad triple to make it more suitable for drilling
natural gas targets in the Duvernay or Montney formations (the rig is scheduled to
commence operations during the fourth quarter of 2014); and
- continued construction of a pad rig announced in the first
quarter of 2014 (the rig is anticipated to meet demand for proposed
liquified natural gas ("LNG") related drilling projects and is
scheduled to be completed in the first half of 2015).
At September 30, 2014, AKITA's
Statement of Financial Position included working capital (current
assets minus current liabilities) of $11,061,000 compared to working capital of
$33,749,000 at September 30, 2013 and working capital of
$40,645,000 at December 31, 2013. Readers should be aware of the
significant capital expenditure program undertaken by the Company
as well as the seasonal nature of AKITA's business and its impact
on non-cash working capital balances. Typically, non-cash working
capital balances reach annual maximum levels at the end of the
first quarter or during the second quarter as a result of break-up
and decline thereafter as a result of increased drilling activity.
Non-cash working capital amounted to $8,127,000 at September
30, 2014 compared to $26,647,000 at December
31, 2013.
During the nine month period ended September 30, 2014, the Company purchased 27,600
Class A Non-Voting Shares at an average price of $15.49 pursuant to a normal course issuer bid.
The Company did not purchase any shares pursuant to a normal course
issuer bid during the first nine months of 2013.
During 2013, the Company was awarded a contract to construct and
operate an ultra deep capacity pad rig under a multi-year contract.
During the first quarter of 2014, the Company commenced
construction of a second pad rig. AKITA sourced approximately
$26 Million of materials for these
rigs from non-Canadian suppliers. In order to minimize the risk of
currency translation adjustments, AKITA purchased forward currency
contracts totalling $18 Million, of
which $4.25 Million was outstanding
at September 30, 2014. These
contracts expire during the fourth quarter of 2014 and the first
quarter of 2015.
The Company had six rigs under multi-year contracts at
September 30, 2014. Of these
contracts, two are anticipated to expire in 2014, one in 2015, one
in 2016, one in 2018 and one in 2019.
From time to time, the Company may provide guarantees for bank
loans to joint venture partners in respect of sales to joint
venture interests. At September 30,
2014, AKITA provided $9,381,000 in deposits with the bank for those
guarantees. These funds have been classified as
"restricted cash" on the Statement of Financial Position.
Forward-Looking Statements
From time to time AKITA makes forward-looking statements. These
statements include but are not limited to comments with respect to
AKITA's objectives and strategies, financial condition, results of
operations, the outlook for the industry and risk management.
By their nature, these forward-looking statements involve
numerous assumptions, inherent risks and uncertainties, both
general and specific, and 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.
Forward-looking statements may be influenced by factors such as
the level of exploration and development activity carried on by
AKITA's customers; world crude oil prices and North American
natural gas prices; weather; access to capital markets and
government policies. We caution that the foregoing list of factors
is not exhaustive and that 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
as required by law, the Company does not undertake to update any
forward-looking statements, whether written or oral, that may be
made from time to time by it or on its behalf.
Selected financial information for the Company is as
follows:
AKITA Drilling
Ltd.
|
|
|
|
Interim
Consolidated Statements of Financial Position
|
|
|
|
|
|
|
|
|
|
|
Unaudited
|
September
30,
|
September
30,
|
December
31,
|
$
Thousands
|
2014
|
2013
|
2013
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
|
Cash and cash
equivalents
|
$
2,934
|
$
22,204
|
$
13,998
|
|
Term
deposits
|
-
|
-
|
5,000
|
|
Accounts
receivable
|
32,250
|
27,695
|
42,342
|
|
Prepaid expenses and
other
|
497
|
281
|
365
|
|
|
35,681
|
50,180
|
61,705
|
Non-current
Assets
|
|
|
|
Restricted
cash
|
9,381
|
5,950
|
5,950
|
Other long-term
assets
|
950
|
877
|
1,017
|
Investments in joint
ventures
|
6,978
|
8,142
|
10,092
|
Property, plant and
equipment
|
254,568
|
213,207
|
212,984
|
Total
Assets
|
$
307,558
|
$
278,356
|
$
291,748
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
21,856
|
$
14,535
|
$
18,865
|
|
Deferred
revenue
|
364
|
498
|
334
|
|
Dividends
payable
|
1,525
|
-
|
1,439
|
|
Income taxes
payable
|
875
|
1,398
|
422
|
|
|
24,620
|
16,431
|
21,060
|
Non-current
Liabilities
|
|
|
|
Financial
instruments
|
261
|
123
|
106
|
Deferred income
taxes
|
23,076
|
20,366
|
22,738
|
Pension
liability
|
2,839
|
2,613
|
2,556
|
Deferred share
units
|
108
|
-
|
-
|
Total
Liabilities
|
50,904
|
39,533
|
46,460
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
Class A and Class B
shares
|
23,871
|
23,611
|
23,908
|
Contributed
surplus
|
3,470
|
3,281
|
3,185
|
Accumulated other
comprehensive income
|
88
|
(21)
|
88
|
Retained
earnings
|
229,225
|
211,952
|
218,107
|
Total
Equity
|
256,654
|
238,823
|
245,288
|
Total Liabilities
and Equity
|
$
307,558
|
$
278,356
|
$
291,748
|
|
|
|
|
|
|
|
|
|
|
AKITA Drilling
Ltd.
|
|
|
|
|
Interim
Consolidated Statements of Net Income and Comprehensive
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
Unaudited
|
September
30,
|
September
30,
|
September
30,
|
September
30,
|
$
Thousands
|
2014
|
2013
|
2014
|
2013
|
|
|
|
|
|
|
Revenue
|
$
36,556
|
$
33,096
|
$
119,263
|
$
122,181
|
|
|
|
|
|
|
Costs and
expenses
|
|
|
|
|
|
Operating and
maintenance
|
25,141
|
21,589
|
78,676
|
77,638
|
|
Depreciation and
amortization
|
7,088
|
6,502
|
22,208
|
19,524
|
|
Selling and
administrative
|
4,043
|
4,314
|
14,097
|
13,753
|
Total costs and
expenses
|
36,272
|
32,405
|
114,981
|
110,915
|
|
|
|
|
|
|
Revenue less costs
and expenses
|
284
|
691
|
4,282
|
11,266
|
|
|
|
|
|
|
Equity income from
joint ventures
|
4,270
|
4,234
|
16,588
|
13,948
|
|
|
|
|
|
|
Other income
(losses)
|
|
|
|
|
|
Interest
income
|
43
|
96
|
142
|
259
|
|
Interest
expense
|
(42)
|
(27)
|
(119)
|
(81)
|
|
Gain on sale of
assets
|
381
|
183
|
499
|
184
|
|
Net other gains
(losses)
|
210
|
(273)
|
118
|
(275)
|
Total other income
(losses)
|
592
|
(21)
|
640
|
87
|
|
|
|
|
|
|
Income before
income taxes
|
5,146
|
4,904
|
21,510
|
25,301
|
|
|
|
|
|
|
Income
taxes
|
1,292
|
1,364
|
5,425
|
6,508
|
|
|
|
|
|
|
Net income and
comprehensive income
for the period attributable to
shareholders
|
3,854
|
3,540
|
16,085
|
18,793
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Class
A and Class B Share
|
|
|
|
|
|
Basic
|
|
$
0.21
|
$
0.20
|
$
0.90
|
$
1.05
|
|
Diluted
|
|
$
0.21
|
$
0.20
|
$
0.89
|
$
1.04
|
|
|
|
|
|
|
|
|
|
|
AKITA Drilling
Ltd.
|
|
|
|
|
Interim
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
Unaudited
|
September
30,
|
September
30,
|
September
30,
|
September
30,
|
$
Thousands
|
2014
|
2013
|
2014
|
2013
|
Operating
Activities
|
|
|
|
|
Net income and
comprehensive income
|
$
3,854
|
$
3,540
|
$
16,085
|
$
18,793
|
Non-cash items
included in net income:
|
|
|
|
|
|
Depreciation and
amortization
|
7,088
|
6,502
|
22,208
|
19,524
|
|
Deferred income
taxes
|
347
|
931
|
338
|
1,480
|
|
Expense for defined
benefit pension plan
|
97
|
93
|
291
|
277
|
|
Stock options and
deferred share units charged to expense
|
154
|
122
|
393
|
221
|
|
Gain loss on sale of
assets
|
(381)
|
(183)
|
(499)
|
(184)
|
|
Unrealized foreign
currency (gain) loss
|
(402)
|
172
|
245
|
172
|
|
Unrealized loss on
financial guarantee contracts
|
185
|
123
|
155
|
123
|
Funds flow from
operations
|
10,942
|
11,300
|
39,216
|
40,406
|
Change in non-cash
working capital:
|
|
|
|
|
|
Accounts
receivable
|
(5,740)
|
(2,756)
|
10,092
|
32,309
|
|
Prepaid expenses and
other
|
194
|
304
|
(132)
|
(122)
|
|
Income taxes
recoverable
|
-
|
168
|
-
|
4,487
|
|
Accounts payable and
accrued liabilities
|
3,720
|
629
|
5,515
|
(24,907)
|
|
Deferred
revenue
|
288
|
127
|
30
|
403
|
|
|
9,404
|
9,772
|
54,721
|
52,576
|
|
Equity income from
joint ventures
|
(4,270)
|
(4,234)
|
(16,588)
|
(13,948)
|
|
Pension benefits
paid
|
(3)
|
(4)
|
(8)
|
(12)
|
|
Interest
paid
|
(10)
|
-
|
(20)
|
(1)
|
|
Income taxes expense
- current
|
945
|
433
|
5,087
|
5,028
|
|
Income taxes
paid
|
(1,425)
|
965
|
(4,634)
|
(3,630)
|
Net cash from
operating activities
|
4,641
|
6,932
|
38,558
|
40,013
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
Capital
expenditures
|
(28,312)
|
(12,755)
|
(71,285)
|
(27,892)
|
Change in non-cash
working capital related to capital
|
3,796
|
(867)
|
(2,749)
|
(5,254)
|
Net distributions to
investment in joint ventures
|
12,527
|
5,419
|
19,702
|
10,631
|
Change in cash
restricted for loan guarantees
|
-
|
(2,950)
|
(3,431)
|
(2,950)
|
Change in term
deposits
|
-
|
-
|
5,000
|
-
|
Proceeds on sale of
assets
|
6,818
|
244
|
8,059
|
357
|
Net cash used in
investing activities
|
(5,171)
|
(10,909)
|
(44,704)
|
(25,108)
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
Dividends
paid
|
(1,526)
|
(1,437)
|
(4,491)
|
(4,129)
|
Proceeds received on
exercise of stock options
|
-
|
-
|
-
|
425
|
Repurchase of share
capital
|
-
|
-
|
(427)
|
-
|
Net cash used in
financing activities
|
(1,526)
|
(1,437)
|
(4,918)
|
(3,704)
|
|
|
|
|
|
|
Increase
(decrease) in cash and cash equivalents
|
(2,056)
|
(5,414)
|
(11,064)
|
11,201
|
Cash and cash
equivalents, beginning of period
|
4,990
|
27,618
|
13,998
|
11,003
|
|
|
|
|
|
|
Cash and Cash
Equivalents, End of Period
|
$
2,934
|
$
22,204
|
$
2,934
|
$
22,204
|
|
|
|
|
|
|
SOURCE AKITA Drilling Ltd.