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Xtreme Drilling Corp. Announces Second Quarter 2018 Financial and Operating Results and Shareholder Meeting Results

CALGARY, Alberta, Aug. 14, 2018 (GLOBE NEWSWIRE) -- (TSX-XDC) - Xtreme Drilling Corp. (“Xtreme” or the “Company”) announces its second quarter 2018 financial and operating results.  It is anticipated that filing will take place on SEDAR of Interim Consolidated Financial Statements as well as Management's Discussion and Analysis for the three and six months ended June 30, 2018, by August 14, 2018.  All reported amounts are in Canadian dollars ("CAD"), unless otherwise noted.

Q2 2018 Highlights
(in Canadian dollars, except where otherwise stated)

  • Operating days for the quarter were 916, an increase from 844 in the previous quarter, or about 9 percent.  Utilization was 79 percent for the quarter, compared to 85 percent in the previous quarter.  The increase in operating days from the prior quarter was because of a full quarter of operating days for all three 850XE rigs.
  • For the three months ended June 30, 2018, the Company reported revenue of $23.37 million as compared to $21.32 million in the previous quarter, or about 10 percent.  The increase is primarily due to higher operating days during the period.  In addition, revenue per day increased to $25,500 from $25,300 in the first quarter of 2018.
  • Operating expenses include all direct and indirect costs associated with the operation, maintenance and support of the drilling operations.  Direct costs are tied to operating levels; however, indirect costs are often not affected by changes in operating days and utilization as they are more fixed in nature.  For the three months ended June 30, 2018, operating expenses on a per operating day basis were $19,600, a decrease from $20,700 in the first quarter.  Operating expenses per operating day decreased primarily to a decrease in startup related costs for the 850XE rigs in the first quarter.
  • General and Administrative expenses were $3.15 million for the three months ended June 30, 2018, an increase from $2.38 million recognized in the first quarter.  General and Administrative expenses for the second quarter includes approximately $1.15 million of professional fees related to the proposed transaction with AKITA Drilling Ltd.  Exclusive of these costs, General and Administrative expenses would have been $2.00 million for the period.
  • Adjusted EBITDA was $3.41 million for the second quarter, an increase over Adjusted EBITDA of $1.53 million in the previous quarter.  This was primarily due to an increase in gross margin of $3.85 million during the period and a decrease in General and Administrative expenses.
  • During the quarter, the Company evaluated the indicators of impairment for property and equipment.  Indicators of impairment were identified for the drilling services segment in connection with the value estimated of the consideration expected to be received for Xtreme shares under the plan of Arrangement.  As a result, an impairment charge of $34.80 million was recorded during the period.
  • In addition, during the quarter, the Company continued to evaluate the indicators of impairment for the assets held for sale and recorded an impairment charge of $1.31 million net of tax during the period to reduce reported values to estimated net realizable values.
  • In June 2018, the Company entered into an agreement to sell two of the XDR 300 rigs classified as assets held for sale at June 30, 2018.  The sale closed on July 2, 2018, and the Company received approximately $7.90 million in proceeds on sale on that date.
  • In April 2018, the Company entered into a loan agreement with a finance company to provide the Company with $4.00 million USD (about $5.20 million CAD).  The loan is payable in monthly installments of $118,000 USD ($155,000 CAD at June 30, 2018) over 36 months, with a balloon payment due at the end of the term.  The loan is secured by one of the 850XE rigs and there are no restrictive covenants associated with this debt.
  • Cash from continuing operations (before consideration of working capital changes) was $2.22 million for the second quarter, up from $0.83 million in the first quarter.
  • The Company’s US dollar ("USD") revenue and expenses are impacted by the exchange rate between the US dollar and Canadian dollar.  For the three months ended June 30, 2018, the average exchange rate used to convert the USD-denominated revenues and expenses to CAD was $1.29/$1 USD ($1.27 for the previous quarter).
  • Capital expenditures for the second quarter were $12.28 million, down from $16.08 million in the first quarter.  The second quarter includes approximately $11.00 million related to the final costs on the 850XE rigs and related drill pipe and spares, a decrease from approximately $13.80 million in the first quarter.

AKITA Drilling Ltd. Transaction Update

Xtreme is pleased to announce the results of its special meeting (the “Meeting”) of the holders (the “Xtreme Shareholders”) of common shares (the “Common Shares”) of Xtreme, held on August 13, 2018, to consider and vote on a plan of arrangement (the “Arrangement”), under the Business Corporations Act (Alberta), involving Xtreme, Xtreme Shareholders and Akita Drilling Ltd. (“Akita”) pursuant to which Akita will acquire all of the issued and outstanding Common Shares.  By special resolution passed at the Meeting, the Arrangement was approved by 99.87% of the votes cast by Xtreme Shareholders.  The application for the Final Order of the Court of Queen’s Bench of Alberta (the “Court”) was made by Xtreme and granted by the Court on August 14, 2018.  Xtreme anticipates that the Arrangement will be completed in the third quarter following receipt of certain regulatory approvals.

Selected Quarterly Financial Information from Continuing Operations

Three months ended Jun 30, 2018 Mar 31, 2018 Dec 31, 2017 Sep 30, 2017
Revenue 23,368   21,321   16,323   18,172  
Adjusted EBITDA 3,409   1,526   818   1,008  
Adjusted EBITDA as a percentage of revenue 15 % 7 % 5 % 6 %
Net loss (43,121 ) (5,926 ) (9,564 ) (8,673 )
Net loss per share – basic (0.58 ) (0.08 ) (0.13 ) (0.12 )
Operating cash flows from operations 2,223   834   (3,130 ) (3,096 )
Capital assets 192,486   220,572   205,456   203,316  
Total assets 229,737   262,927   251,573   253,171  
Net debt 9,380   2,772   (8,126 ) (19,144 )
Operating days 916   844   707   851  
Utilization (percentage)  79 % 85 % 77 % 93 %
Weighted average number of rigs in service 13   11   10   10  
Total number of available rigs, end of quarter 13   12   10   10  
Three months ended Jun 30, 2017 Mar 31, 2017 Dec 31, 2016 Sep 30, 2016
Revenue 15,141   12,379   9,929   8,468  
Adjusted EBITDA (1,630 ) (78 ) (148 ) (1,423 )
Adjusted EBITDA as a percentage of revenue (11 )% (1 )% (1 )% (17 )%
Net loss (48,366 ) (12,168 ) (11,122 ) (29,542 )
Net loss per share - basic (0.61 ) (0.14 ) (0.13 ) (0.35 )
Operating cash flows from operations (4,957 ) 101   (1,032 ) (1,168 )
Capital assets 196,704   245,267   240,656   243,564  
Total assets 272,798   348,083   366,762   373,104  
Net debt (41,682 ) (88,152 ) (113,882 ) (118,863 )
Operating days 683   583   479   433  
Utilization (percentage) 75 % 36 % 25 % 22 %
Weighted average number of rigs in service 10   18   21   21  
Total number of rigs, end of quarter 10   18   21   21  


 
Xtreme Drilling Corp.
Interim Consolidated Statements of Financial Position
(in thousands of Canadian dollars)


  June 30, 2018

 
December 31, 2017

 
Assets

Current assets

  Cash and cash equivalents
6,047   15,450  
  Accounts receivable 15,169   12,081  
  Other receivables 1,803   1,782  
  Inventory 3,361   1,703  
  Assets held for sale 7,901    
  Prepaid expenses and other 1,134   1,140  
  35,415   32,156  
Assets held for sale 1,317   13,172  
Tax recoverable 519   789  
Property and equipment 192,486   205,456  
Total Assets 229,737   251,573  
Liabilities and Equity

Current liabilities

 

  Accounts payable and accrued liabilities
20,011   12,214  
  Current tax payable 181   219  
  Secured borrowings 6,265   4,419  
  Current portion of finance leases 128   118  
  Current portion of long-term debt 3,670   1,569  
  30,255   18,539  
Finance leases 472   514  
Long-term debt 11,757   5,755  
Total Liabilities 42,484   24,808  
Shareholders’ equity

 

     Share capital
298,262   298,262  
Contributed surplus 30,853   30,156  
Accumulated deficit (229,486 ) (180,439 )
Foreign currency translation reserve 87,624   78,786  
Total Shareholders’ Equity 187,253   226,765  
Total Liabilities and Shareholders’ Equity 229,737   251,573  


 
Xtreme Drilling Corp.
Interim Consolidated Statements of Loss
For the three months ended June 30, 2018 and 2017
(in thousands of Canadian dollars, except share and per share data)
 


  Jun 30, 2018

 
Jun 30, 2017

 
Jun 30, 2018

 
Jun 30, 2017

 
Revenue 23,368   15,141   44,689   27,520  
Expenses                
Operating expenses 17,965   13,452   35,435   23,264  
General and administrative expenses 3,149   3,319   5,530   5,964  
Depreciation expense 7,872   7,148   13,097   16,233  
Impairment of property and equipment and assets held for sale 36,111   25,983   37,534   25,983  
Stock-based compensation 487   227   697   460  
Foreign exchange loss (gain)
10   313
  (160
) 422
 
(Gain) loss on disposal of property and equipment and assets held for sale (20 ) 13,007   (20 ) 15,690  
Other income (3 ) (37 ) (9 ) (59 )
Interest expense 873     1,255    
Loss before income tax (43,076 ) (48,271 ) (48,670 ) (60,437 )
Tax expense

 

     Current expense 
45   95   377   97  
Total tax expense 45   95   377   97  
Net loss (43,121 ) (48,366 ) (49,047 ) (60,534 )
Net loss per common share

  – basic
(0.58 ) (0.61 ) (0.65 ) (0.77 )
  – diluted (0.58 ) (0.61 ) (0.65 ) (0.77 )
Weighted average number of common shares

  – basic
74,982,894   79,067,648   74,982,894   79,078,541  
  – diluted 74,982,894   79,067,648   74,982,894   79,078,541  


 
Xtreme Drilling Corp.
Interim Consolidated Statements of Comprehensive Loss
For the three months ended June 30, 2018 and 2017    
(in thousands of Canadian dollars)

     

  Jun 30, 2018 Jun 30, 2017 Jun 30, 2018 Jun 30, 2017
Net loss (43,121 ) (48,366 ) (49,047 ) (60,534 )
Other comprehensive gain (loss)

Items that may be subsequently reclassified to profit or loss:

     Unrealized gain (loss) on translating financial statements of foreign operations
4,207   (3,980 ) 8,838   (7,329 )
Comprehensive loss (38,914 ) (52,346 ) (40,209 ) (67,863 )

                                                                         

                                                                         

Xtreme Drilling Corp.
Interim Consolidated Statements of Changes in Equity
For the three months ended June 30, 2018 and 2017
(in thousands of Canadian dollars)

 


  Share
capital
Contributed
surplus
Accumulated
deficit
Foreign currency
translation reserve
Total
Shareholders’
Equity
Balance at January 1, 2017 339,448   13,387   (101,670 ) 94,306   345,471  
Net loss     (60,534 )   (60,534 )
Other comprehensive loss: Currency translation differences       (7,329 ) (7,329 )
Total comprehensive loss     (60,534 ) (7,329 ) (67,863 )
Employee share option scheme:                    
Value of employee services   460       460  
Transfer from share option 106   (106 )      
Repurchase of shares (41,634 ) 16,557     —      —   (25,077 )
Proceeds from shares issued 28         28  
Total transactions with owners (41,500 ) 16,911       (24,589 )
Balance at June 30, 2017 297,948   30,298   (162,204 ) 86,977   253,019  
Balance at January 1, 2018 298,262   30,156   (180,439 ) 78,786   226,765  
Net loss     (49,047 )   (49,047 )
Other comprehensive gain:                    
  Currency translation differences       8,838   8,838  
 Total comprehensive loss     (49,047 ) 8,838   (40,209 )
Employee share option scheme:

  Value of employee services
  697       697  
 Total transactions with owners   697       697  
 Balance at June 30, 2018 298,262   30,853   (229,486 ) 87,624   187,253  

                               

Xtreme Drilling Corp.
Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
 


  2018   2017  
Cash flow provided by: 

Operating activities

Net loss
(49,047 ) (60,534 )
Items not affecting cash:        
Depreciation expense 13,097   16,233  
Impairment of property and equipment and assets held for sale 37,534   25,983  
Stock-based compensation 697   460  
(Gain) loss on disposal of property and equipment and assets held for sale (20 ) 15,690  
Provision for doubtful accounts   199  
Interest expense 1,190    
Interest paid (1,118 )  
Amortization of debt issuance costs 65    
Unrealized foreign exchange (gain) loss 422   (104 )
Current tax expense 377   97  
Taxes paid (140 ) (2,880 )
Operating cash flows from continuing operations 3,057   (4,856 )
Operating cash flows from discontinued operations   (446 )
Changes in items of non-cash working capital 3,502   (5,997 )
Net cash provided by (used in) operating activities 6,559   (11,299 )
Financing activities        
Drawdowns of secured borrowings, net 1,503    
Proceeds from long-term debt 9,000    
Repayment of long-term debt (1,374 )  
Debt issuance cost (113 )  
Payments of financing lease (18 )  
Purchase of common shares   —   (25,076 )
Proceeds from exercise of stock options   28  
Net cash generated from (used in) financing activities 8,998   (25,048 )
Investing activities        
Proceeds from sale of equipment and assets held for sale, net 3,260    
Capital expenditures (28,350 ) (39,836 )
Changes in items of non-cash working capital related to investing items (147 ) 4,970  
Net cash used in investing activities (25,237 ) (34,866 )
Effect of exchange rate changes on cash and cash equivalents 277   (976 )
Decrease in cash and cash equivalents (9,403 ) (72,189 )
Cash and cash equivalents -  beginning of period 15,450   115,240  
Cash and cash equivalents - end of period 6,047   43,051  


Adjusted EBITDA from Operations

    Three months ended
    June 30, 2018
 
June 30, 2017

Net loss   (43,121 )   (48,366 )
Interest expense   873      
Depreciation   7,872     7,148  
Tax expense   45     95  
    (34,331   (41,123 )
       
Non-cash items:      
  Impairment of property and equipment and assets held
  for sale 
  36,111      

25,983
 
  Stock-based compensation   487     227  
  Foreign exchange loss (gain)   10     313  
  (Gain) loss on disposal of property and equipment and 
  assets held for sale
  (20 )   13,007  
    36,588     39,530  
       
Non-recurring items:      
  Other income      (3 )   (37 )
  Cots related to the plan of Arrangement     1,155      
    1,151     (37 )
       
Adjusted EBITDA   3,409     (1,630 )


Reader Advisory

This news release, or documents incorporated herein, contains forward-looking information (“FLI”). FLI is typically contained in statements with words such as “anticipate”, “believe”, “estimate”, “expect”, “plan”, “schedule”, “intend”, “propose” or similar words suggesting future outcomes or an outlook.  More particularly, this NEWS RELEASE contains FLI that may relate to contracting, marketing, financing, construction, modifications, deployment, operation, and utilization of drilling rigs in the Company’s current and future fleet.  Although Xtreme believes expectations reflected in such FLI are reasonable, readers should not place undue reliance on them because Xtreme can give no assurance they will prove to be correct. There are many factors that could cause FLI not to be correct, including risks and uncertainties inherent in the Company's business.

FLI is based on certain factors and assumptions including, but not limited to:

  • the assessment of current and projected future drilling and related operations;
  • ongoing and future strategic business alliances,
  • negotiations and opportunities to enter new, extend or complete existing contracts;
  • the availability and cost of financing;
  • currency exchange rates; timing and magnitude of capital expenditures;
  • expenses and other variables affecting rig operation, modification and construction;
  • the ability and commitment of vendors to provide rig equipment, services and supplies, including labor, in a cost-effective and timely manner;
  • the issuance of applied-for patents;
  • changes in tax structures and rates; and,
  • government regulations.

Although Xtreme considers the assumptions used to prepare this news release reasonable, based on information available to management as of August 14, 2018, ultimately the assumptions may prove to be incorrect.
               
FLI is also subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from management's current expectations.  These factors include, but are not limited to:

  • the cyclical nature of drilling market demand;
  • currency exchange rates;
  • commodity prices;
  • access to credit and to equity markets;
  • the availability and retention of qualified personnel;
  • vendor-provided equipment components and services; and
  • competition for customers.

Management’s assumptions considered the following:

  • ongoing access to key services, supplies and equipment required to continue operating and maintaining the rigs, including fuel;
  • continued successful performance of drilling and related equipment;
  • expectations regarding gross margin;
  • recruitment and retention of qualified personnel;
  • continuation or extension of existing long-term, multi-well contracts or other contracts;
  • revenue expectations related to shorter-term drilling opportunities;
  • willingness and ability of customers to remit amounts owing to Xtreme in accordance with normal industry practices; and,
  • management of accounts receivable in direct relation to revenue generation.

In preparing this news release, the following risk factors were considered:

  • fluctuations in crude oil and natural gas prices, as well as supply and demand;
  • fluctuation in currency exchange and interest rates;
  • financial stability of Xtreme’s customers;
  • current and future applications for Xtreme's proprietary technology;
  • related services provided by, and competition from, other drilling contractors;
  • regulatory and economic conditions in regions where Xtreme operates;
  • environmental constraints;
  • changes to government legislation;
  • international trade barriers or restrictions; and,
  • where appropriate, global economic, political and military events, as well as acts of terrorism, riots, strikes, insurrections, revolutions and civil war.

FLI contained in this news release about prospective results of operations, financial position or cash provided by operating activities is based on assumptions about future events, including economic conditions and proposed courses of action, and on management’s assessment of relevant information currently available.  Readers are cautioned such financial outlook information contained in this news release is not appropriate for purposes other than for which it is disclosed here.  Readers should not place undue importance on FLI and should not rely on this information as of any other date.  Except as required pursuant to applicable securities laws, Xtreme disclaims any intention, and assumes no obligation, to update publicly or revise FLI to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such FLI or otherwise.

About Xtreme

Xtreme Drilling Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification AC drilling rigs featuring leading-edge proprietary technology.  Currently Xtreme operates one service line - Drilling Services (XDR) under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada and the United States.  For more information about the Company, please visit http://www.xtremedrillingcorp.com.

CONTACT INFORMATION
Xtreme Drilling Corp.

Matt Porter

President and Chief Executive Officer

+1 281 994 4600

ir@xdccorp.com

http://www.xtremedrillingcorp.com

 

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