CALGARY,
AB, Aug. 5, 2022 /CNW/ -
SECOND QUARTER
HIGHLIGHTS
- Revenue for the second quarter of 2022 was $344.1 million, a 62 percent increase from the
second quarter of 2021 revenue of $212.3
million.
- Revenue by geographic area:
-
- Canada - $78.7 million, 23 percent of total;
- United States - $203.5 million, 59 percent of total; and
- International - $61.9 million, 18
percent of total.
- Canadian drilling recorded 2,369 operating days in the second
quarter of 2022, a 124 percent increase from 1,058 operating days
in the second quarter of 2021. Canadian well servicing recorded
12,099 operating hours in the second quarter of 2022, a 51 percent
increase from 8,027 operating hours in the second quarter of
2021.
- United States drilling
recorded 4,277 operating days in the second quarter of 2022, a 48
percent increase from 2,899 operating days in the second quarter of
2021. United States well servicing
recorded 30,725 operating hours in the second quarter of 2022, a
seven percent decrease from 33,080 operating hours in the second
quarter of 2021.
- International drilling recorded 1,030 operating days in the
second quarter of 2022, a 22 percent increase from 844 operating
days recorded in the second quarter of 2021.
- Adjusted EBITDA for the second quarter of 2022 was $68.3 million, a 50 percent increase from
Adjusted EBITDA of $45.6 million for
the second quarter of 2021.
- Funds flow from operations for the second quarter of 2022
increased 97 percent to $81.5 million
from $41.3 million in the second
quarter of the prior year.
- During the second quarter of 2022, the Company did not record
any Canada Emergency Wage Subsidy
program payments as compared with $5.1
million recognized in the second quarter of 2021.
- General and administrative expense increased 38 percent and
totaled $12.2 million in the second
quarter of 2022, compared with $8.9
million in the second quarter of 2021.
- Net capital purchases for the second quarter of 2022 were
$50.1 million, consisting of
$28.5 million in upgrade capital,
$25.8 million in maintenance capital
less proceeds from dispositions of $4.2
million.
- Capital expenditures for the 2022 year are targeted to be
approximately $165.0 million of which
$40.0 million relates to growth
capital. The increase partially relates to two drilling rigs that
will be reactivated in Oman in the
fourth quarter of 2022. As at June 30,
2022, 24 drilling rigs have be reactivated and
upgraded.
- Long-term debt, net of cash, was reduced by $83.0 million since December 31, 2021.
- On June 7, 2022, the Company
settled its Convertible Debentures of $37.0
million through the issuance of 21,142,857 common shares of
the Company at a conversion price of $1.75 per share.
OVERVIEW
Revenue for the second quarter of 2022 was $344.1 million, an increase of 62 percent from
revenue for the second quarter of 2021 of $212.3 million. Revenue for the six months ended
June 30, 2022 was $676.8 million, an increase of 57 percent from
revenue for the six months ended June 30,
2021 of $430.9 million.
Adjusted EBITDA totaled $68.3
million ($0.40 per common
share) in the second quarter of 2022, 50 percent higher than
Adjusted EBITDA of $45.6 million
($0.28 per common share) in the
second quarter of 2021. For the first six months ended June 30, 2022, Adjusted EBITDA totaled
$138.3 million ($0.83 per common share), 45 percent higher than
Adjusted EBITDA of $95.5 million
($0.59 per common share) in the first
six months ended June 30, 2021.
Net loss attributable to common shareholders for the second
quarter of 2022 was $28.1 million
($0.17 per common share) compared to
a net loss attributable to common shareholders of $52.3 million ($0.32 per common share) for the second quarter of
2021. Net loss attributable to common shareholders for the six
months ended June 30, 2022 was
$21.6 million ($0.13 per common share), compared to a net loss
attributable to common shareholders of $95.8
million ($0.59 per common
share) for the six months ended June 30,
2021.
Funds flow from operations increased 97 percent to $81.5 million ($0.47 per common share) in the second quarter of
2022 compared to $41.3 million
($0.25 per common share) in the
second quarter of the prior year. Funds flow from operations
increased 80 percent to $158.2
million ($0.94 per common
share) for the six months ended June 30,
2022 compared to $87.9 million
($0.54 per common share) for the six
months ended June 30, 2021.
The macro-economic conditions impacting the crude oil and
natural gas industry continued to be positive for oilfield
services. Strong global commodity prices continued to be supported
by strengthening global crude oil demand and structural tightness
in crude oil supply. OPEC+ nations continue to incrementally add
supply to the market and are expected to eliminate coordinated
production cuts in the coming months. In addition, US-based
producers remain committed to moderate increases in production. The
invasion of Ukraine by the
Russian Federation and the
resulting hostilities have further challenged global oil and
natural gas markets with uncertainty regarding Russian oil and
natural gas supply to the global market, putting further upward
pressure on commodity prices. These factors and constructive
industry fundamentals have resulted in increased demand for
oilfield services, driving improved activity and drilling rig rates
in the Company's North American segments year-over-year.
Over the near term, there is considerable uncertainty regarding
the impacts of the Russian invasion of Ukraine and the resulting ongoing hostilities
on the global economy, recession risk in certain operating
environments, and other factors that may impact the demand for
crude oil and natural gas, commodity prices, and the demand for
oilfield services.
The Company's operating days were higher in the three and six
months ended June 30, 2022, when
compared to the same period in 2021. Operations were positively
impacted by improving industry conditions, driving activity
improvements year-over-year. Furthermore, the acquisition of 35
land-based drilling rigs in Canada
during the third quarter of 2021 helped further improve the
Company's financial and operating results.
The average United States
dollar exchange rate was $1.27 for
the six months ended June 30, 2022
(2021 - $1.25) versus the Canadian
dollar, an increase of two percent, compared to the same period of
2021.
Working capital at June 30, 2022 was a surplus of
$102.8 million, compared to a surplus
of $104.2 million at December 31, 2021. The Company's available
liquidity, consisting of cash and available borrowings under its
$900.0 million revolving credit
facility (the "Credit Facility"), was $67.0 million at June
30, 2022.
|
This news release
contains "forward-looking information and statements" within the
meaning of applicable securities legislation. For a full disclosure
of the forward-looking information and statements and the risks to
which they are subject, see the "Advisory Regarding Forward-Looking
Statements" later in this news release. This news release
contains references to Adjusted EBITDA and Adjusted EBITDA per
common share. These measures do not have any standardized meaning
prescribed by IFRS and accordingly, may not be comparable to
similar measures used by other companies. The non-GAAP measures
included in this news release should not be considered as an
alternative to, or more meaningful than, the IFRS measure from
which they are derived or to which they are compared. See "Non-GAAP
Measures" later in this news release.
|
FINANCIAL AND OPERATING
HIGHLIGHTS
(Unaudited, in
thousands of Canadian dollars, except per common share data and
operating information)
|
|
Three months ended June
30
|
|
Six months ended June
30
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Revenue
|
$
344,123
|
|
$
212,306
|
|
62
|
|
$
676,799
|
|
$
430,850
|
|
57
|
Adjusted EBITDA
1
|
68,332
|
|
45,645
|
|
50
|
|
138,297
|
|
95,543
|
|
45
|
Adjusted EBITDA per
common share 1
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.40
|
|
$0.28
|
|
43
|
|
$0.83
|
|
$0.59
|
|
41
|
Diluted
|
$0.44
|
|
$0.28
|
|
57
|
|
$0.82
|
|
$0.59
|
|
39
|
Net loss attributable
to common shareholders
|
(28,138)
|
|
(52,292)
|
|
46
|
|
(21,551)
|
|
(95,842)
|
|
78
|
Net loss attributable
to common shareholders per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$(0.17)
|
|
$(0.32)
|
|
47
|
|
$(0.13)
|
|
$(0.59)
|
|
77
|
Diluted
|
$(0.17)
|
|
$(0.32)
|
|
47
|
|
$(0.13)
|
|
$(0.59)
|
|
77
|
Cash provided by
operating activities
|
99,520
|
|
53,185
|
|
87
|
|
154,076
|
|
80,022
|
|
93
|
Funds flow from
operations
|
81,497
|
|
41,326
|
|
97
|
|
158,238
|
|
87,853
|
|
80
|
Funds flow from
operations per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.47
|
|
$0.25
|
|
88
|
|
$0.94
|
|
$0.54
|
|
74
|
Diluted
|
$0.52
|
|
$0.25
|
|
nm
|
|
$0.94
|
|
$0.54
|
|
74
|
Long-term debt, net of
cash
|
1,357,537
|
|
1,313,837
|
|
3
|
|
1,357,537
|
|
1,313,837
|
|
3
|
Weighted average common
shares - basic (000s)
|
171,646
|
|
162,295
|
|
6
|
|
167,456
|
|
162,481
|
|
3
|
Weighted average common
shares - diluted (000s)
|
173,157
|
|
162,642
|
|
6
|
|
168,325
|
|
162,773
|
|
3
|
Drilling
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Number of marketed
rigs 2
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
123
|
|
92
|
|
34
|
|
123
|
|
92
|
|
34
|
United
States
|
89
|
|
93
|
|
(4)
|
|
89
|
|
93
|
|
(4)
|
International
4
|
34
|
|
42
|
|
(19)
|
|
34
|
|
42
|
|
(19)
|
Total
|
246
|
|
227
|
|
8
|
|
246
|
|
227
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days
5
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
2,369
|
|
1,058
|
|
nm
|
|
6,097
|
|
2,904
|
|
nm
|
United
States
|
4,277
|
|
2,899
|
|
48
|
|
7,965
|
|
5,480
|
|
45
|
International
4
|
1,030
|
|
844
|
|
22
|
|
1,903
|
|
1,703
|
|
12
|
Total
|
7,676
|
|
4,801
|
|
60
|
|
15,965
|
|
10,087
|
|
58
|
Well
Servicing
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Number of
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
52
|
|
52
|
|
—
|
|
52
|
|
52
|
|
—
|
United
States
|
48
|
|
48
|
|
—
|
|
48
|
|
48
|
|
—
|
Total
|
100
|
|
100
|
|
—
|
|
100
|
|
100
|
|
—
|
Operating
hours
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
12,099
|
|
8,027
|
|
51
|
|
23,359
|
|
17,117
|
|
36
|
United
States
|
30,725
|
|
33,080
|
|
(7)
|
|
60,414
|
|
63,045
|
|
(4)
|
Total
|
42,824
|
|
41,107
|
|
4
|
|
83,773
|
|
80,162
|
|
5
|
nm - calculation not
meaningful
|
1.
Refer to Adjusted EBITDA calculation in Non-GAAP
Measures
|
2.
Total owned rigs: Canada - 137, United States - 126,
International - 46 (2021 total owned rigs: Canada - 118, United
States - 136, International - 53)
|
3.
Excludes coring rigs.
|
4.
Includes workover rigs.
|
5.
Defined as contract drilling days, between spud to rig
release.
|
FINANCIAL POSITION AND CAPITAL
EXPENDITURES HIGHLIGHTS
As at ($
thousands)
|
June 30
2022
|
|
December 31
2021
|
|
June 30 2021
|
Working capital1,
2
|
102,830
|
|
104,228
|
|
89,919
|
Cash
|
38,994
|
|
13,305
|
|
19,532
|
Long-term
debt
|
1,396,531
|
|
1,453,884
|
|
1,333,369
|
Long-term debt, net of
cash
|
1,357,537
|
|
1,440,579
|
|
1,313,837
|
Total long-term
financial liabilities 2
|
1,408,706
|
|
1,465,858
|
|
1,344,412
|
Total assets
|
3,011,267
|
|
2,977,054
|
|
2,857,832
|
Long-term debt to
long-term debt plus equity ratio
|
0.53
|
|
0.55
|
|
0.52
|
1 See Non-GAAP Measures
section.
|
2
Comparative working capital and total long-term financial
liabilities has been revised to conform with current year's
presentation
|
|
Three months ended June
30
|
|
|
Six months ended
June 30
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
% change
|
|
|
2022
|
|
|
2021
|
|
|
% change
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upgrade/growth
|
28,495
|
|
|
4,043
|
|
|
nm
|
|
|
36,586
|
|
|
7,595
|
|
|
nm
|
Maintenance
|
25,784
|
|
|
9,544
|
|
|
nm
|
|
|
49,644
|
|
|
16,744
|
|
|
nm
|
Proceeds
from disposals of property and equipment
|
(4,189)
|
|
|
(1,808)
|
|
|
nm
|
|
|
(46,936)
|
|
|
(2,982)
|
|
|
nm
|
Net capital
expenditures
|
50,090
|
|
|
11,779
|
|
|
nm
|
|
|
39,294
|
|
|
21,357
|
|
|
84
|
nm - calculation not
meaningful
|
REVENUE AND OILFIELD SERVICES
EXPENSE
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
78,684
|
|
31,411
|
|
150
|
|
189,950
|
|
84,967
|
|
124
|
United
States
|
203,507
|
|
130,815
|
|
56
|
|
370,330
|
|
246,226
|
|
50
|
International
|
61,932
|
|
50,080
|
|
24
|
|
116,519
|
|
99,657
|
|
17
|
Total
revenue
|
344,123
|
|
212,306
|
|
62
|
|
676,799
|
|
430,850
|
|
57
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield services
expense
|
263,582
|
|
157,793
|
|
67
|
|
515,403
|
|
317,236
|
|
62
|
Revenue for the three months ended June 30, 2022 totaled
$344.1 million, an increase of 62
percent from the second quarter of 2021 $212.3 million. Revenue for the six months ended
June 30, 2022 totaled $676.8
million, a 57 percent increase from the six months ended
June 30, 2021.
The increase in total revenue during the second quarter of 2022
was primarily due to the global economic recovery and more
favourable industry conditions due to increasing oil and natural
gas commodity prices. Increased demand for oilfield services and
the acquisition of 35 land-based drilling rigs in Canada during the third quarter of 2021, also
contributed to the increase in revenue. The positive foreign
exchange translation impact further contributed to the increase in
revenue reported in Canadian currency.
CANADIAN OILFIELD
SERVICES
Revenue increased by $47.3 million
to $78.7 million for the three months
ended June 30, 2022 from $31.4
million for the three months ended June 30, 2021. The
Company recorded revenue of $190.0
million in Canada for the
six months ended June 30, 2021, an
increase of $105.0 million from
$85.0 million recorded for the six
months ended June 30, 2021.
Canadian revenue accounted for 23 percent of the Company's total
revenue in the second quarter of 2022 (2021 - 15 percent) and 28
percent (2021 - 20 percent) for the first half of 2022.
The Company's Canadian drilling operations recorded 2,369
operating days in the second quarter of 2022, compared to 1,058
operating days for the second quarter of 2021, an increase of
1,311 operating days. For the six months ended June 30, 2022,
the Company recorded 6,097 operating days compared to 2,904
drilling days for the six months ended June 30, 2021, an
increase of 3,193 operating days. Canadian well servicing hours
increased by 51 percent to 12,099 operating hours in the
second quarter of 2022 compared to 8,027 operating hours in the
corresponding period of 2021. For the six months ended
June 30, 2022, well servicing hours increased by 36 percent to
23,359 operating hours compared with 17,117 operating hours for the
six months ended June 30, 2021.
The operating and financial results for the Company's Canadian
operations in the first half year of 2022 were positively impacted
by improved industry conditions that increased both drilling and
well servicing activity. In addition, operational activity
increased as a result of the Company's acquisition of 35 land-based
drilling rigs during the third quarter of 2021. Offsetting the
increase was the elimination of the Canada Emergency Wage Subsidy ("CEWS")
program in 2021 by the Government of Canada, of which $5.1
million and $9.8 million were
received by the Company in the second quarter and the first half of
2021 respectively.
During the first half of 2022, the Company transferred four
under-utilized drilling rigs into its Canadian operations reserve
fleet.
UNITED
STATES OILFIELD SERVICES
The Company's United States
operations recorded revenue of $203.5 million in the second
quarter of 2022, an increase of 56 percent from the $130.8 million recorded in the corresponding
period of the prior year. During the six months ended June 30,
2022, revenue of $370.3 million was
recorded, an increase of 50 percent from the $246.2 million recorded in the corresponding
period of the prior year.
The Company's United States
operations accounted for 59 percent of the Company's revenue in the
second quarter of 2022 (2021 - 62 percent) and 55
percent of the Company's revenue in the first six months of
2022 (2021 - 57 percent).
Drilling rig operating days increased by 48 percent to 4,277
operating days in the second quarter of 2022 from 2,899 operating
days in the second quarter of 2021, and increased by 45
percent to 7,965 operating days in the first six months
of 2022 from 5,480 operating days in the first six months of 2021.
United States well servicing hours
decreased by seven percent in the second quarter of 2022 to 30,725
operating hours from 33,080 operating hours in the second quarter
of 2021. For the first half of 2022, well servicing activity
decreased four percent to 60,414 operating hours from 63,045
operating hours in the first half of 2021.
Overall operating and financial results for the Company's
United States operations reflect
improving industry conditions, increasing drilling activity and rig
revenue rates in addition to steady well servicing rig utilization.
The financial results from the Company's United States operations were further
positively impacted on the currency translation, as the United States dollar strengthened relative
to the Canadian dollar for the first six months of 2022.
During the first six months of 2022, the Company sold one cold
stacked drilling rig from its United
States operations and transferred three under-utilized
drilling rigs into its United
States reserve fleet.
INTERNATIONAL OILFIELD
SERVICES
The Company's international operations recorded revenue of
$61.9 million in the second quarter
of 2022, a 24 percent increase from the $50.1 million recorded in the corresponding
period of the prior year. International revenues for the six months
ended June 30, 2022, increased 17 percent to $116.5 million from $99.7
million recorded in the six months ended June 30,
2021.
The Company's international operations contributed 18 percent of
the total revenue in the second quarter of 2022 (2021 - 23 percent)
and 17 percent of the Company's revenue in the first six months of
2022 (2021 - 23 percent).
International operating days for the three months ended
June 30, 2022 totaled 1,030 operating
days compared to 844 operating days in the same period of 2021, an
increase of 22 percent. For the six months ended June 30, 2022, international operating days
totaled 1,903 operating days compared to 1,703 operating days for
the six months ended June 30, 2021,
an increase of 12 percent.
Operating and financial results from the international
operations reflect a steady and incrementally positive operating
environment as COVID-19 related disruptions continued to
dissipate.
During the first six months of 2022, the Company sold two
cold-stacked drilling rigs located in Mexico for US $34.0
million and transferred six under-utilized drilling rigs
into its international operations reserve fleet.
DEPRECIATION
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Depreciation
|
68,692
|
|
69,756
|
|
(2)
|
|
138,672
|
|
140,733
|
|
(1)
|
Depreciation expense totaled $68.7
million for the second quarter of 2022 compared with
$69.8 million for the second quarter
of 2021, a decrease of two percent. Depreciation expense for the
first six months of 2022 decreased by one percent, to $138.7 million compared with $140.7 million in the first six months of 2021.
The decrease in depreciation is due to certain operating assets
having become fully depreciated in which case no further
depreciation expense will be incurred on such assets. Offsetting
the decrease to the depreciation expense is the negative foreign
exchange translation on converting USD denominated depreciation
expense.
GENERAL AND
ADMINISTRATIVE
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
General and
administrative
|
12,209
|
|
8,868
|
|
38
|
|
23,099
|
|
18,071
|
|
28
|
% of revenue
|
3.5
|
|
4.2
|
|
|
|
3.4
|
|
4.2
|
|
|
General and administrative expense increased 38 percent to
$12.2 million (3.5 percent of
revenue) for the second quarter of 2022 compared to $8.9 million (4.2 percent of revenue) for the
second quarter of 2021. For the six months ended June 30,
2022, general and administrative expense totaled $23.1 million (3.4 percent of revenue) compared
to $18.1 million (4.2 percent of
revenue) for the six months ended June 30,
2021. General and administrative expenses increased in
support of increased operational activity, the end of the CEWS
program ($0.9 million and
$1.5 million received during the
second quarter and the first half of 2021 respectively), and the
full reinstatement of salary roll-backs and annual wage increases.
Further increasing the general and administrative expense is the
negative foreign exchange translation on converting USD denominated
general and administrative expense.
FOREIGN EXCHANGE AND OTHER
LOSS
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Foreign exchange and
other loss
|
4,047
|
|
6,313
|
|
(36)
|
|
2,702
|
|
12,627
|
|
(79)
|
Included in this amount is the impact of foreign currency
fluctuations in the Company's subsidiaries that have functional
currencies other than the Canadian dollar.
GAIN ON ASSET SALE
|
Three months ended June
30
|
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
% change
|
|
|
2022
|
|
|
2021
|
|
|
% change
|
Gain on asset
sale
|
(1,354)
|
|
|
—
|
|
|
nm
|
|
|
(31,296)
|
|
|
—
|
|
|
nm
|
nm - calculation not
meaningful
|
During the first half of 2022, the Company finalized the sale of
two drilling rigs that were cold-stacked in Mexico and other unrelated equipment. The net
cash proceeds received for two drilling rigs were US $33.1 million, resulting in a gain of US
$23.9 million or Canadian
$29.9 million.
INTEREST EXPENSE
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Interest
expense
|
27,563
|
|
23,576
|
|
17
|
|
52,747
|
|
47,033
|
|
12
|
Interest expense was incurred on the Company's $900.0 million Credit Facility, US $417.5 million Senior Notes, $37.0 million subordinate convertible debentures
(the "Convertible Debentures") prior to conversion,
and capital lease obligations.
Interest expense increased by 17 percent for the second
quarter of 2022 compared to the second quarter of 2021. Interest
expense increased by 12 percent for the first six months of 2022
compared to the same period of 2021. The increase for the three and
six months of 2022 is the result of higher overall borrowing and
higher interest rates. The negative translational impact on
United States dollar-denominated
debt further increased interest expense for the quarter.
The Company's blended interest rate on its outstanding debt for
the 2022 year will be approximately eight percent. The current
capital structure primarily consisting of the Credit Facility and
the Senior Notes allows the Company to utilize funds flow generated
to reduce debt in the near term with greater flexibility than a
more non-callable weighted capital structure.
INCOME TAXES (RECOVERY)
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Current income taxes
(recovery)
|
(92)
|
|
476
|
|
nm
|
|
(1,762)
|
|
526
|
|
nm
|
Deferred taxes income
recovery
|
(8,124)
|
|
(11,428)
|
|
(29)
|
|
(19,656)
|
|
(20,772)
|
|
(5)
|
Total income taxes
recovery
|
(8,216)
|
|
(10,952)
|
|
(25)
|
|
(21,418)
|
|
(20,246)
|
|
6
|
Effective income tax
rate (%)
|
22.6
|
|
18.1
|
|
25
|
|
49.9
|
|
17.9
|
|
nm
|
nm - calculation not
meaningful
|
The effective income tax rate for the three months ended
June 30, 2022 was 22.6 percent
compared to 18.1 percent for the three months ended June 30, 2021. The effective income tax rate for
the six months ended June 30, 2022
was 49.9 percent compared to 17.9 percent for the six months ended
June 30, 2021. The effective income
tax rate in the first six months of the current year was higher
than the effective income tax rate in the same period of 2021 due
to activity levels, gains on disposal of assets and tax recoveries
in foreign tax jurisdictions.
FUNDS FLOW FROM OPERATIONS AND
WORKING CAPITAL
($ thousands, except
per common share data)
|
Three months ended June
30
|
|
Six months ended
June 30
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Cash provided by
operating activities
|
99,520
|
|
53,185
|
|
87
|
|
154,076
|
|
80,022
|
|
93
|
Funds flow from
operations
|
81,497
|
|
41,326
|
|
97
|
|
158,238
|
|
87,853
|
|
80
|
Funds flow from
operations per common share
|
$0.47
|
|
$0.25
|
|
88
|
|
$0.94
|
|
$0.54
|
|
74
|
Working capital
1
|
102,830
|
|
104,228
|
|
(1)
|
|
102,830
|
|
104,228
|
|
(1)
|
1
Comparative figure as at December 31, 2021
|
During the three months ended June 30, 2022, the Company
generated funds flow from operations of $81.5 million ($0.47 per common share) compared to funds flow
from operations of $41.3 million
($0.25 per common share) for the
three months ended June 30, 2021, an increase of 97 percent.
For the six months ended June 30, 2022, the Company generated
funds flow from operations of $158.2
million ($0.94 per common
share) an increase of 80 percent from $87.9
million ($0.54 per common
share) for the six months ended June 30, 2021. The increase in
funds flow from operations for six months ended June 30, 2022 compared to the same period of 2021
is largely due to the increase in activity compared to the prior
period as a result of the oil and natural gas industry's improving
operating environment.
At June 30, 2022, the Company's working capital was a
surplus of $102.8 million, compared
to a working capital surplus of $104.2
million at December 31, 2021. The Company currently
expects funds generated by operations, combined with current and
future credit facilities, to fully support the Company's current
operating and capital requirements. The Company's Credit Facility
provides for total borrowings of $900.0
million, of which $28.1
million was undrawn and available at June 30, 2022.
INVESTING ACTIVITIES
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Purchase of property
and equipment
|
(54,279)
|
|
(13,587)
|
|
nm
|
|
(86,230)
|
|
(24,339)
|
|
nm
|
Proceeds from disposals
of property and equipment
|
4,189
|
|
1,808
|
|
nm
|
|
46,936
|
|
2,982
|
|
nm
|
Distribution to
non-controlling interest
|
(1,852)
|
|
—
|
|
nm
|
|
(1,852)
|
|
—
|
|
nm
|
Net change in non-cash
working capital
|
3,205
|
|
4,041
|
|
(21)
|
|
8,902
|
|
1,003
|
|
nm
|
Cash used in investing
activities
|
(48,737)
|
|
(7,738)
|
|
nm
|
|
(32,244)
|
|
(20,354)
|
|
58
|
nm - calculation not
meaningful
|
Net purchases of property and equipment for the second quarter
of 2022 totaled $50.1 million
(2021 - $11.8 million). Net
purchases of property and equipment during the first six months of
2022 totaled $39.3 million (2021 -
$21.4 million). The purchase of
property and equipment for the first six months of 2022 consists of
$36.6 million in upgrade capital and
$49.6 million in maintenance
capital.
FINANCING ACTIVITIES
|
Three months ended June
30
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Proceeds from long-term
debt
|
26,705
|
|
29,935
|
|
(11)
|
|
28,605
|
|
38,531
|
|
(26)
|
Repayments of long-term
debt
|
(23,460)
|
|
(50,799)
|
|
(54)
|
|
(65,394)
|
|
(66,563)
|
|
(2)
|
Lease obligation
principal
repayments
|
(2,291)
|
|
(1,746)
|
|
31
|
|
(4,189)
|
|
(3,227)
|
|
30
|
Interest
paid
|
(41,434)
|
|
(34,318)
|
|
21
|
|
(53,887)
|
|
(49,851)
|
|
8
|
Issuance of common
shares under share option plan
|
—
|
|
—
|
|
nm
|
|
36
|
|
—
|
|
nm
|
Purchase of common
shares held in trust
|
(405)
|
|
(224)
|
|
81
|
|
(780)
|
|
(484)
|
|
61
|
Cash used in financing
activities
|
(40,885)
|
|
(57,152)
|
|
(28)
|
|
(95,609)
|
|
(81,594)
|
|
17
|
nm - calculation not
meaningful
|
The Company's available bank facilities consist of a
$900.0 million Credit
Facility, of which $28.1 million
was available and undrawn as of June 30,
2022. In addition, the Company has available US $50.0 million secured letter of credit facility,
of which US $1.2 million was
available as of June 30, 2022.
On May 31, 2022, the Company
settled its Convertible Debentures of $37.0
million through the issuance of 21,142,857 common shares of
the Company at conversion price of $1.75. The holders' elections to convert the
Convertible Debentures were made following the issue of notice by
the Company, on April 8, 2022, of its
intention to redeem all issued and outstanding Convertible
Debentures on June 7, 2022.
The Company may at any time and from time to time acquire Senior
Notes for cancellation by means of open market repurchases or
negotiated transactions. The Company is limited in the acquisition
and cancellation of the Senior Notes up to $25.0 million under applicable covenants. Senior
Notes may be repurchased for redemption in excess of $25.0 million if certain criteria are met. No
such repurchases occurred during the first half of 2022.
Covenants
The following is a list of the Company's currently applicable
covenants and the calculations as at June
30, 2022:
|
Covenant
|
|
|
June 30,
2022
|
The Credit
Facility
|
|
|
|
|
Consolidated
EBITDA1
|
> 140.0
million
|
|
|
258,414
|
Consolidated EBITDA to
Consolidated Interest Expense1,2
|
≥ 2.25
|
|
|
2.57
|
Consolidated Senior
Debt to Consolidated EBITDA1,3
|
≤ 3.25
|
|
|
3.22
|
1 Please refer to Non-GAAP
Measures for Consolidated EBITDA definition.
|
2
Consolidated Interest Expense is defined as all interest expense
calculated on twelve month rolling consolidated basis and excluding
Senior Notes interest in repurchase.
|
3
Consolidated Senior Debt is defined as Consolidated Total Debt
minus Subordinated Debt.
|
As at June 30, 2022, the Company
was in compliance with all covenants related to the Credit
Facility.
The Credit Facility
The Credit Facility agreement, available on SEDAR including
amendments, requires that the Company comply with certain covenants
including minimum Consolidated EBITDA requirements, Consolidated
EBITDA to Consolidated Interest Expense ratio and a Consolidated
Senior Debt to Consolidated EBITDA ratio as detailed above.
The Credit Facility also contains certain covenants that place
restrictions on the Company's ability to repurchase or redeem
Senior Notes and Convertible Debentures; to create, incur or assume
additional indebtedness; change the Company's primary business;
enter into mergers or amalgamations; and dispose of property. In
the most recent amendment and restatement of the credit agreement,
dated December 17, 2021, permitted
encumbrances are limited to $25.0
million.
The Senior Notes
The note indenture governing the Senior Notes, available on
SEDAR, contains certain restrictions and exemptions on the
Company's ability to pay dividends, purchase and redeem shares and
subordinated debt of the Company, and make certain restricted
investments. Limitations on these restrictions are tempered by the
existence of a number of exceptions to the general prohibition,
including baskets allowing for restricted payments.
The note indenture also restricts the ability to incur
additional indebtedness if the Fixed Charge Coverage Ratio
determined on a pro forma basis for the most recently ended four
fiscal quarter period for which internal financial statements are
available is not at least 2.0 to 1.0. As of June 30, 2022, the Company has not incurred
additional indebtedness that would require the Fixed Charge
Coverage Ratio to be calculated. As is the case with restricted
payments, there are a number of exceptions to this prohibition on
the incurrence of indebtedness, including the incurrence of debt
under credit facilities up to the greater of $900.0 million or 22.5 percent of the Company's
consolidated tangible assets and of additional secured debt
subordinated to the credit facilities up to the greater of US
$125.0 million or four percent of the
Company's consolidated tangible assets.
NEW BUILDS AND MAJOR
RETROFITS
During the first six months ended June
30, 2022, the Company transferred four, three and six
under-utilized drilling rigs to its Canadian, United States and international operations
reserve fleet respectively. In addition, the Company sold one cold
stacked drilling rig from its United
States operations and two cold-stacked drilling rigs from
its international operations. The Company's projected capital
expenditures in 2022 are expected to be approximately $165.0 million of which $40.0 million relates to growth capital. As at
June 30, 2022, 24 drilling rigs have
be reactivated and upgraded.
OUTLOOK
Industry Overview
The outlook for oilfield services continues to be positive with
strong industry market fundamentals. Steady oil and natural gas
demand and structural tightness in supply continue to support
improved commodity prices, strengthening demand for oilfield
services year-over-year.
OPEC+ nations continue to add moderated supply to the market in
addition to United States based
producers' modest increases in production. The invasion of
Ukraine by the Russian Federation and the ongoing hostilities
coupled with international community responses and sanctions, have
further impacted global oil and natural gas markets while creating
uncertainty regarding Russian oil and natural gas exports. Despite
strong supply and demand fundamentals in oil markets, inflationary
concerns generally continue to prompt a tightening of monetary
policy and a rise in interest rates. Rising interest rates largely
resulting from efforts to quell rising high inflation have
subsequently led to uncertainty in financial markets regarding
recession risk. These factors continue to impact global commodity
prices and have led to a recent pullback in commodity prices. The
average benchmark price of West Texas Intermediate ("WTI")
was US $110/bbl in May 2022 and decreased to US $102/bbl in July
2022.
However, we expect strong crude oil and natural gas demand is
likely to continue and tight supply in a robust commodity price
environment may further drive oilfield services industry activity
and rate improvements during the remainder of 2022. While we
continue to expect oil and natural gas producers to remain
committed to prioritizing shareholder returns, higher oilfield
service industry utilization is expected to drive day-rate pricing
improvements year-over-year in the Company's North American
segments.
Over the short-term, there is considerable uncertainty regarding
macroeconomic conditions. The impact of the ongoing hostilities in
Ukraine on the global economy in
general, and the future supply of Russian oil and natural gas to
Europe in particular, as well as
international sanctions on the Russian
Federation, inflationary pressures and recession risk along
with a myriad of other factors may impact near term supply and
demand for, and pricing of crude oil and natural gas and related
oilfield services.
Canadian Activity
Canadian activity, currently representing 28 percent of total
revenue for the first half of 2022, improved in the second quarter
of 2022 as operations exited seasonal spring break-up. We expect
activity to continue to improve over the third quarter and into the
fourth quarter of 2022.
As of August 4, 2022, of our 123
marketed Canadian drilling rigs, approximately 41 percent are
engaged under term contracts of various durations. Approximately 41
percent of our contracted rigs have a remaining term of six months
or longer, although they may be subject to early termination.
United States Activity
United States activity,
currently representing 55 percent of total revenue for the first
half of 2022, improved during the second quarter of 2022 and is
expected to continue to steadily improve in the third quarter of
2022. Dwindling drilled but uncompleted ("DUC") well
inventory in the US is expected to positively impact activity as
producers are expected to drill new wells to maintain or grow
current production levels through the remainder of the
year.
As of August 4, 2022, of our 89
marketed United States drilling
rigs, approximately 61 percent are engaged under term contracts of
various durations. Approximately 24 percent of our contracted rigs
have a remaining term of six months or longer, although they may be
subject to early termination.
International Activity
International activity, currently representing 17 percent of
total revenue in the first half of 2022, improved over the second
quarter, with increased activity in Latin
America and Australia.
Operations in Australia are
expected to remain steady to modestly improve in the third quarter
of 2022. Operations in Argentina,
with two rigs active, are also expected remain steady in the third
quarter of 2022. In the Middle
East, operations are expected to remain steady in the third
quarter of 2022 with four rigs active and are anticipated to
improve in the fourth quarter of 2022 with increased activity in
Oman.
As of August 4, 2022, of our 34
marketed international drilling rigs, approximately 38 percent are
engaged under term contracts of various durations. Approximately
62 percent of our contracted rigs have a remaining term of six
months or longer, although they may be subject to early
termination.
RISK AND UNCERTAINTIES
The Company is subject to several risks and uncertainties. A
discussion of certain risks faced by the Company may be found under
the "Risk Factors" section of the Company's Annual Information Form
("AIF") and the "Risks and Uncertainties" section of the
Company's Management's Discussion & Analysis
("MD&A") for the year ended December 31, 2021, which are available under the
Company's SEDAR profile at www.sedar.com.
Other than as described within this document, the Company's risk
factors and management of those risks have not changed
substantially from as disclosed in the AIF. Additional risks and
uncertainties not presently known by the Company, or that the
Company does not currently anticipate or deem material, may also
impair the Company's business operations or financial condition. If
any of the events described in the risk factors in this document or
the Company's AIF actually occur, overall business, operating
results and the financial condition of the Company could be
materially adversely affected.
CONFERENCE CALL
A conference call will be held to discuss the Company's second
quarter 2022 results at 10:00 a.m.
MDT (12:00 p.m. EDT) on
Friday, August 5, 2022. The
conference call number is 1-416-764-8659 (in Toronto) or 1-888-664-6392 (outside
Toronto). The conference call
reservation number is: 52222893. A taped recording will be
available until August 12, 2022 by
dialing 1-416-764-8677 (in Toronto) or 1-888-390-0541 (outside
Toronto) and entering the
reservation number 222893#. A live broadcast may be accessed
through the Company's website at
www.ensignenergy.com/presentations.
Ensign Energy Services Inc. is an international oilfield
services contractor and is listed on the Toronto Stock Exchange
under the trading symbol ESI.
Ensign Energy Services
Inc.
Consolidated Statements of Financial
Position
As at
|
|
June 30
2022
|
|
December 31
2021
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
|
$
38,994
|
|
$
13,305
|
Accounts
receivable
|
|
263,020
|
|
226,807
|
Inventories, prepaid
and other
|
|
47,152
|
|
49,172
|
Income taxes
receivable
|
|
137
|
|
580
|
Total current
assets
|
|
349,303
|
|
289,864
|
Property and
equipment
|
|
2,470,465
|
|
2,512,953
|
Deferred income
taxes
|
|
191,499
|
|
174,237
|
Total assets
|
|
$
3,011,267
|
|
$ 2,977,054
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
accruals
|
|
$
237,118
|
|
$
177,932
|
Share-based
compensation
|
|
3,389
|
|
1,055
|
Income taxes
payable
|
|
912
|
|
1,389
|
Current portion of
lease obligation
|
|
5,054
|
|
5,260
|
Total current
liabilities
|
|
246,473
|
|
185,636
|
|
|
|
|
|
Share-based
compensation
|
|
18,008
|
|
7,966
|
Long-term
debt
|
|
1,396,531
|
|
1,453,884
|
Lease
obligations
|
|
5,764
|
|
4,327
|
Income tax
payable
|
|
6,411
|
|
7,647
|
Deferred income
taxes
|
|
120,279
|
|
120,100
|
Non-controlling
interest
|
|
—
|
|
4,832
|
Total
liabilities
|
|
1,793,466
|
|
1,784,392
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Shareholders'
capital
|
|
268,748
|
|
230,376
|
Contributed
surplus
|
|
22,627
|
|
23,197
|
Equity component of
convertible debenture
|
|
—
|
|
2,380
|
Accumulated other
comprehensive income
|
|
234,576
|
|
223,308
|
Retained
earnings
|
|
691,850
|
|
713,401
|
Total shareholders'
equity
|
|
1,217,801
|
|
1,192,662
|
Total liabilities and
shareholders' equity
|
|
$
3,011,267
|
|
$ 2,977,054
|
Ensign Energy Services
Inc.
Consolidated Statements of Loss
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 30
2022
|
|
June 30 2021
|
|
June 30
2022
|
|
June 30 2021
|
(Unaudited - in
thousands of Canadian dollars, except
per common share data)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
344,123
|
|
$
212,306
|
|
$
676,799
|
|
$
430,850
|
Expenses
|
|
|
|
|
|
|
|
|
Oilfield
services
|
|
263,582
|
|
157,793
|
|
515,403
|
|
317,236
|
Depreciation
|
|
68,692
|
|
69,756
|
|
138,672
|
|
140,733
|
General and
administrative
|
|
12,209
|
|
8,868
|
|
23,099
|
|
18,071
|
Restructuring
|
|
—
|
|
—
|
|
—
|
|
3,533
|
Share-based
compensation
|
|
3,560
|
|
5,820
|
|
13,959
|
|
6,822
|
Foreign exchange and
other loss
|
|
4,047
|
|
6,313
|
|
2,702
|
|
12,627
|
Total
expenses
|
|
352,090
|
|
248,550
|
|
693,835
|
|
499,022
|
Loss before interest
expense, accretion of deferred financing charges and other gains
and income taxes
|
(7,967)
|
|
(36,244)
|
|
(17,036)
|
|
(68,172)
|
|
|
|
|
|
|
|
|
|
Gain on repurchase of
unsecured Senior Notes
|
|
—
|
|
(2,139)
|
|
—
|
|
(7,431)
|
Gain on asset
sale
|
|
(1,354)
|
|
—
|
|
(31,296)
|
|
—
|
Interest
expense
|
|
27,563
|
|
23,576
|
|
52,747
|
|
47,033
|
Accretion of deferred
financing charges
|
|
2,199
|
|
2,704
|
|
4,401
|
|
5,407
|
Loss before income
taxes
|
|
(36,375)
|
|
(60,385)
|
|
(42,888)
|
|
(113,181)
|
Income taxes
(recovery)
|
|
|
|
|
|
|
|
|
Current income taxes
(recovery)
|
|
(92)
|
|
476
|
|
(1,762)
|
|
526
|
Deferred income taxes
recovery
|
|
(8,124)
|
|
(11,428)
|
|
(19,656)
|
|
(20,772)
|
Total income tax
recovery
|
|
(8,216)
|
|
(10,952)
|
|
(21,418)
|
|
(20,246)
|
Net loss from
continuing operations
|
|
(28,159)
|
|
(49,433)
|
|
(21,470)
|
|
(92,935)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations
|
|
—
|
|
(2,899)
|
|
—
|
|
(2,899)
|
Net
loss
|
|
$
(28,159)
|
|
$
(52,332)
|
|
$
(21,470)
|
|
$
(95,834)
|
Net (loss) income
attributable to:
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
(28,138)
|
|
(52,292)
|
|
(21,551)
|
|
(95,842)
|
Non-controlling
interests
|
|
(21)
|
|
(40)
|
|
81
|
|
8
|
|
|
(28,159)
|
|
(52,332)
|
|
(21,470)
|
|
(95,834)
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.17)
|
|
$
(0.32)
|
|
$
(0.13)
|
|
$
(0.59)
|
Diluted
|
|
$
(0.17)
|
|
$
(0.32)
|
|
$
(0.13)
|
|
$
(0.59)
|
Ensign Energy Services
Inc.
Consolidated Statements of Cash Flows
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June 30
2022
|
|
June 30 2021
|
|
June 30
2022
|
|
June 30 2021
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
(28,159)
|
|
$
(52,332)
|
|
$
(21,470)
|
|
$
(95,834)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation
|
|
68,692
|
|
69,756
|
|
138,672
|
|
140,733
|
Gain on asset
sale
|
|
(1,354)
|
|
—
|
|
(31,296)
|
|
—
|
Gain on purchase of
unsecured Senior Notes
|
|
—
|
|
(2,139)
|
|
—
|
|
(7,431)
|
Share-based
compensation, net cash settlements
|
|
1,823
|
|
5,820
|
|
12,222
|
|
6,822
|
Unrealized foreign exchange and other
|
|
18,857
|
|
5,369
|
|
22,618
|
|
11,895
|
Accretion of deferred
financing charges
|
|
2,199
|
|
2,704
|
|
4,401
|
|
5,407
|
Interest
expense
|
|
27,563
|
|
23,576
|
|
52,747
|
|
47,033
|
Deferred income taxes
recovery
|
|
(8,124)
|
|
(11,428)
|
|
(19,656)
|
|
(20,772)
|
Funds flow from
operations
|
|
81,497
|
|
41,326
|
|
158,238
|
|
87,853
|
Net change in non-cash
working capital
|
|
18,023
|
|
11,859
|
|
(4,162)
|
|
(7,831)
|
Cash provided by
operating activities
|
|
99,520
|
|
53,185
|
|
154,076
|
|
80,022
|
Investing
activities
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
(54,279)
|
|
(13,587)
|
|
(86,230)
|
|
(24,339)
|
Proceeds from disposals
of property and equipment
|
|
4,189
|
|
1,808
|
|
46,936
|
|
2,982
|
Distribution to
non-controlling interest
|
|
(1,852)
|
|
—
|
|
(1,852)
|
|
—
|
Net change in non-cash
working capital
|
|
3,205
|
|
4,041
|
|
8,902
|
|
1,003
|
Cash used in
investing activities
|
|
(48,737)
|
|
(7,738)
|
|
(32,244)
|
|
(20,354)
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from long-term
debt
|
|
26,705
|
|
29,935
|
|
28,605
|
|
38,531
|
Repayments of long-term
debt
|
|
(23,460)
|
|
(50,799)
|
|
(65,394)
|
|
(66,563)
|
Lease obligation
principal repayments
|
|
(2,291)
|
|
(1,746)
|
|
(4,189)
|
|
(3,227)
|
Interest
paid
|
|
(41,434)
|
|
(34,318)
|
|
(53,887)
|
|
(49,851)
|
Issuance of common
shares under share option plan
|
|
—
|
|
—
|
|
36
|
|
—
|
Purchase of common
shares held in trust
|
|
(405)
|
|
(224)
|
|
(780)
|
|
(484)
|
Cash used in
financing activities
|
|
(40,885)
|
|
(57,152)
|
|
(95,609)
|
|
(81,594)
|
Net increase
(decrease) in cash
|
|
9,898
|
|
(11,705)
|
|
26,223
|
|
(21,926)
|
Effects of foreign
exchange on cash
|
|
(610)
|
|
(2,179)
|
|
(534)
|
|
(2,740)
|
Cash – beginning of
period
|
|
29,706
|
|
33,416
|
|
13,305
|
|
44,198
|
Cash – end of
period
|
|
$
38,994
|
|
$
19,532
|
|
$
38,994
|
|
$
19,532
|
Ensign Energy Services
Inc.
Non-GAAP Measures
Adjusted EBITDA, Adjusted EBITDA per common share and
Consolidated EBITDA. These measures do not have any standardized
meaning prescribed by IFRS and accordingly, may not be comparable
to similar measures used by other companies.
Adjusted EBITDA is used by management and investors to analyze
the Company's profitability based on the Company's principle
business activities prior to how these activities are financed, how
assets are depreciated, amortized and how the results are taxed in
various jurisdictions. Additionally, in order to focus on the core
business alone, amounts are removed related to foreign exchange,
share-based compensation expense, the sale of assets, restructuring
costs, gain on repurchase of unsecured Senior Notes and fair value
adjustments on financial assets and liabilities, as the Company
does not deem these to relate to its core drilling and well
services business. Adjusted EBITDA is not intended to represent net
loss as calculated in accordance with IFRS.
ADJUSTED
EBITDA
|
Three months ended June
30
|
|
|
Six months ended June
30
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
Loss before income
taxes
|
(36,375)
|
|
|
(60,385)
|
|
|
(42,888)
|
|
|
(113,181)
|
Add-back/(deduct):
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
27,563
|
|
|
23,576
|
|
|
52,747
|
|
|
47,033
|
Accretion of deferred
financing charges
|
2,199
|
|
|
2,704
|
|
|
4,401
|
|
|
5,407
|
Depreciation
|
68,692
|
|
|
69,756
|
|
|
138,672
|
|
|
140,733
|
Restructuring
|
—
|
|
|
—
|
|
|
—
|
|
|
3,533
|
Share-based compensation
|
3,560
|
|
|
5,820
|
|
|
13,959
|
|
|
6,822
|
Gain on
asset sale
|
(1,354)
|
|
|
—
|
|
|
(31,296)
|
|
|
—
|
Gain on
repurchase of unsecured Senior Notes 1
|
—
|
|
|
(2,139)
|
|
|
0
|
|
|
(7,431)
|
Foreign
exchange and other loss
|
4,047
|
|
|
6,313
|
|
|
2,702
|
|
|
12,627
|
Adjusted
EBITDA
|
68,332
|
|
|
45,645
|
|
|
138,297
|
|
|
95,543
|
1 See "Interest Expense"
section for definition of Senior Notes.
|
Working Capital
Working capital is defined as current assets less current
liabilities as reported on the consolidated statements of financial
position.
ADVISORY REGARDING FORWARD-LOOKING
STATEMENTS
Certain statements in this document constitute forward-looking
statements or information (collectively referred to herein as
"forward-looking statements") within the meaning of applicable
securities legislation. Forward-looking statements generally can be
identified by the words "believe", "anticipate", "expect", "plan",
"estimate", "target", "continue", "could", "intend", "may",
"potential", "predict", "should", "will", "objective", "project",
"forecast", "goal", "guidance", "outlook", "effort", "seeks",
"schedule" or other expressions of a similar nature suggesting
future outcome or statements regarding an outlook.
Disclosure related to expected future commodity pricing or
trends, revenue rates, equipment utilization or operating activity
levels, operating costs, capital expenditures and other prospective
guidance provided throughout this document, including, but not
limited to, information provided in the "Funds Flow from Operations
and Working Capital" section regarding the Company's expectation
that funds generated by operations combined with current and future
credit facilities will support current operating and capital
requirements, information provided in the "New Builds and Major
Retrofits" section and information provided in the "Outlook"
section regarding the general outlook for the remainder of 2022,
are examples of forward-looking statements.
These statements are not representations or guarantees of future
performance and are subject to certain risks and unforeseen
results. The reader should not place undue reliance on
forward-looking statements as there can be no assurance that the
plans, initiatives, projections, anticipations or expectations upon
which they are based will occur. The forward-looking statements are
based on current assumptions, expectations, estimates and
projections about the Company and the industries and environments
in which the Company operates, which speak only as of the date such
statements were made or as of the date of the report or document in
which they are contained. These assumptions include, among other
things: the fluctuation in commodity prices may pressure customers
to modify their capital programs; the status of current
negotiations with the Company's customers and vendors; customer
focus on safety performance; existing term contracts that may not
be renewed or are terminated prematurely; the Company's ability to
provide services on a timely basis and successfully bid on new
contracts; successful integration of acquisitions; the general
stability of the economic and political environments in the
jurisdictions where we operate, and impacts of geopolitical events
such as the hostilities between Ukraine and the Russian Federation and the global community
responses thereto.
The forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that could cause the actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risk factors
include, among others: general economic and business conditions
which will, among other things, impact demand for and market prices
of the Company's services and the ability of the Company's
customers to pay accounts receivable balances; volatility of and
assumptions regarding commodity prices; foreign exchange exposure;
fluctuations in currency and interest rates; inflation; economic
conditions in the countries and regions in which the Company
conducts business; political uncertainty and civil unrest; the
Company's ability to implement its business strategy; impact of
competition and industry conditions; risks associated with
long-term contracts; force majeure events; determinations by
Organization of Petroleum Exporting Countries ("OPEC") and
other countries (OPEC and various other countries are referred to
as "OPEC +") regarding production levels; loss of key
customers; litigation risks, including the Company's defence of
lawsuits; risks associated with contingent liabilities and
potential unknown liabilities; availability and cost of labour and
other equipment, supplies and services; business interruption and
casualty losses; the Company's ability to complete its capital
programs; operating hazards and other difficulties inherent in the
operation of the Company's oilfield services equipment;
availability and cost of financing and insurance; access to credit
facilities and debt capital markets; availability of sufficient
cash flow to service and repay our debts; impairment of capital
assets; the Company's ability to amend or comply with covenants
under the credit facility and other debt instruments; actions by
governmental authorities; impact of and changes to laws and
regulations impacting the Company and the Company's customers, and
the expenditures required to comply with them (including safety and
environmental laws and regulations and the impact of climate change
initiatives on capital and operating costs); safety performance;
environmental contamination; shifting interest to alternative
energy sources; environmental activism; the adequacy of the
Company's provision for taxes; tax challenges; the impact of, and
the Company's response to COVID-19; workforce and reliance on key
management; technology; cybersecurity risks; seasonality and
weather; risks associated with acquisitions and ability to
successfully integrate acquisitions; risks associated with internal
controls over financial reporting; the impact of the ongoing
hostilities between Ukraine and
the Russian Federation and the
global community responses thereto and other risks and
uncertainties affecting the Company's business, revenues and
expenses.
In addition, the Company's operations and levels of demand for
its services have been, and at times in the future may be, affected
by political risks and developments, such as expropriation,
nationalization, or regime change, and by national, regional and
local laws and regulations such as changes in taxes, royalties and
other amounts payable to governments or governmental agencies,
environmental protection regulations, the global COVID-19 pandemic,
the potential reinstatement or removal of COVID-19 mitigation
strategies and the impact thereof upon the Company, its customers
and its business, the ongoing hostilities between Ukraine and the Russian Federation, related potential future
impact on the supply of oil and natural gas to Europe by Russia and the impact of global community
responses to the ongoing conflict.
Should one or more of these risks or uncertainties materialize,
or should any of the Company's assumptions prove incorrect, actual
results from operations may vary in material respects from those
expressed or implied by the forward-looking statements. The impact
of any one factor on a particular forward-looking statement is not
determinable with certainty as such factors are interdependent upon
other factors, and the Company's course of action would depend upon
its assessment of the future considering all information then
available. Unpredictable or unknown factors not discussed in this
document could also have material adverse effects on
forward-looking statements.
Readers are cautioned that the lists of important factors
contained herein are not exhaustive. For additional information on
these and other factors that could affect the Company's business,
operations or financial condition, refer to the "Risks and
Uncertainties" section of this document and the "Risk Factors"
section of the Company's Annual Information Form for the year ended
December 31, 2021 available on SEDAR
at www.sedar.com.
The forward-looking statements contained in this document are
expressly qualified in their entirety by this cautionary statement.
The forward-looking statements contained herein are made as of the
date hereof and the Company undertakes no obligation to update
publicly or revise any forward-looking statements or information,
whether as a result of new information, future events or otherwise,
except as required by law.
SOURCE Ensign Energy Services Inc.