THIRD QUARTER HIGHLIGHTS
- Revenue for the third quarter of 2022 was
$432.6 million , a 61 percent increase from the third quarter of 2021 revenue of$268.6 million . - Revenue by geographic area:
Canada -$123.4 million , 29 percent of total;United States -$247.4 million , 57 percent of total; and- International -
$61.8 million , 14 percent of total. - Canadian drilling recorded 4,009 operating days in the third quarter of 2022, a 41 percent increase from 2,846 operating days in the third quarter of 2021. Canadian well servicing recorded 12,857 operating hours in the third quarter of 2022, a 38 percent increase from 9,316 operating hours in the third quarter of 2021.
United States drilling recorded 4,937 operating days in the third quarter of 2022, a 61 percent increase from 3,074 operating days in the third quarter of 2021.United States well servicing recorded 32,877 operating hours in the third quarter of 2022, a one percent increase from 32,452 operating hours in the third quarter of 2021.- International drilling recorded 996 operating days in the third quarter of 2022, a seven percent increase from 929 operating days recorded in the third quarter of 2021.
- Adjusted EBITDA for the third quarter of 2022 was
$105.4 million , a 76 percent increase from Adjusted EBITDA of$59.8 million for the third quarter of 2021. - Funds flow from operations for the third quarter of 2022 increased 84 percent to
$103.3 million from$56.2 million in the third quarter of the prior year. - During the third quarter of 2022, the Company did not record any
Canada Emergency Wage Subsidy program payments as compared with$5.3 million recognized in the third quarter of 2021. - General and administrative expense on a per operating day basis decreased by eight percent and totaled
$12.8 million (2.9 percent of revenue) in the third quarter of 2022, compared with$10.0 million (3.7 percent of revenue) in the third quarter of 2021. - Net capital purchases for the third quarter of 2022 were
$46.9 million , consisting of$18.4 million in upgrade capital and$28.5 million in maintenance capital. - Capital expenditures for the 2022 year are targeted to be approximately
$165.0 million of which$60.0 million relates to upgrade and growth capital. Within the upgrade and growth capital, two drilling rigs will be reactivated inOman in the fourth quarter of 2022, as well as a third in the first half of 2023. In addition, as atSeptember 30, 2022 , 31 drilling rigs have been reactivated and upgraded during 2022. - Long-term debt, net of cash, was reduced by
$25.1 million sinceDecember 31, 2021 . - In the nine months ended
September 30, 2022 , a total of five rigs have been contracted or re-contracted in the Company'sMiddle East division. By mid-2023, the Company expects seven of the eight marketed rigs in theMiddle East will be active and operating on long-term contracts. - Subsequent to
September 30, 2022 , the Company announced the sale of its Canadian directional drilling business, including all operating assets and personnel, for a purchase price of$5.0 million to Cathedral Energy Services Ltd. ("Cathedral"). The purchase price has been satisfied through the issuance of 7,017,988 common shares of Cathedral that were conveyed to the Company. - The Company is also pleased to announce the publication of their second annual Sustainability Report for the year-ended
December 30, 2021 . The report, available at esg.ensignenergy.com, highlights the Company's environmental, social, and governance ("ESG") performance over the past year. The report enhances ESG disclosure on diversity and inclusion, ESG governance, supply chain governance, and innovative emission reducing solutions.
OVERVIEW
Revenue for the third quarter of 2022 was
Adjusted EBITDA totaled
Net income attributable to common shareholders for the third quarter of 2022 was
Funds flow from operations increased 84 percent to
While the macro-economic conditions impacting the crude oil and natural gas industry continue to fluctuate, the general outlook for oilfield services continues to be positive reflecting year-over-year increases in oilfield services demand and activity. Global inflationary concerns have continued to prompt central banks to tighten monetary policies. Increasing interest rates, largely resulting from efforts to quell rising inflation, have subsequently led to uncertainty for global economies regarding recession risk and contracting economic growth. These factors continue to impact global energy commodity prices and add uncertainty to the macro-outlook over the short-term.
However, despite the recent pull back in global crude oil commodity prices, demand for crude oil continues to improve year-over-year. Furthermore, OPEC+ nations continue to moderate supply and most recently announced supply cuts to current output, further tightening supply. Tight supply, coupled with positive commodity prices, have resulted in increased demand for oilfield services, driving both 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 ongoing hostilities in
The Company's operating days were higher in the three and nine months ended
The average
The Company's working capital at
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 | Nine months ended | ||||||||||
2022 | 2021 | % change | 2022 | 2021 | % change | ||||||
Revenue | $ 432,550 | $ 268,578 | 61 | $ 1,109,349 | $ 699,428 | 59 | |||||
Adjusted EBITDA 1 | 105,358 | 59,769 | 76 | 243,655 | 155,312 | 57 | |||||
Adjusted EBITDA per common share 1 | |||||||||||
Basic | 46 | 43 | |||||||||
Diluted | 50 | 43 | |||||||||
Net income (loss) attributable to common shareholders | 17,782 | (34,398) | nm | (3,769) | (130,240) | (97) | |||||
Net income (loss) attributable to common shareholders per common share | |||||||||||
Basic | nm | (97) | |||||||||
Diluted | nm | (98) | |||||||||
Cash provided by operating activities | 44,353 | 59,399 | (25) | 198,465 | 139,421 | 42 | |||||
Funds flow from operations | 103,321 | 56,198 | 84 | 261,595 | 144,051 | 82 | |||||
Funds flow from operations per common share | |||||||||||
Basic | 51 | 65 | |||||||||
Diluted | 53 | 66 | |||||||||
Long-term debt, net of cash | 1,415,520 | 1,418,997 | — | 1,415,520 | 1,418,997 | — | |||||
Weighted average common shares - basic (000s) | 183,713 | 162,481 | 13 | 178,246 | 162,385 | 10 | |||||
Weighted average common shares - diluted (000s) | 185,131 | 163,444 | 13 | 179,520 | 162,845 | 10 | |||||
Drilling | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Number of marketed rigs 2 | |||||||||||
123 | 127 | (3) | 123 | 127 | (3) | ||||||
89 | 93 | (4) | 89 | 93 | (4) | ||||||
International 4 | 34 | 42 | (19) | 34 | 42 | (19) | |||||
Total | 246 | 262 | (6) | 246 | 262 | (6) | |||||
Operating days 5 | |||||||||||
4,009 | 2,846 | 41 | 10,106 | 5,750 | 76 | ||||||
4,937 | 3,074 | 61 | 12,902 | 8,554 | 51 | ||||||
International 4 | 996 | 929 | 7 | 2,899 | 2,632 | 10 | |||||
Total | 9,942 | 6,849 | 45 | 25,907 | 16,936 | 53 | |||||
Well Servicing | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Number of rigs | |||||||||||
52 | 52 | — | 52 | 52 | — | ||||||
48 | 48 | — | 48 | 48 | — | ||||||
Total | 100 | 100 | — | 100 | 100 | — | |||||
Operating hours | |||||||||||
12,857 | 9,316 | 38 | 36,216 | 26,433 | 37 | ||||||
32,877 | 32,452 | 1 | 93,291 | 95,497 | (2) | ||||||
Total | 45,734 | 41,768 | 9 | 129,507 | 121,930 | 6 |
nm | - calculation not meaningful |
1. | Refer to Adjusted EBITDA calculation in Non-GAAP Measures |
2. | Total owned rigs: |
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) | September |
|
| ||
Working capital 1, 2 | 136,435 | 104,228 | 79,311 | ||
Cash | 29,994 | 13,305 | 24,326 | ||
Long-term debt | 1,445,514 | 1,453,884 | 1,443,323 | ||
Long-term debt, net of cash | 1,415,520 | 1,440,579 | 1,418,997 | ||
Total long-term financial liabilities 2 | 1,458,352 | 1,465,858 | 1,453,404 | ||
Total assets | 3,176,408 | 2,977,054 | 3,006,840 | ||
Long-term debt to long-term debt plus equity ratio | 0.53 | 0.55 | 0.54 |
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 | Nine months ended | ||||||||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||||||||
Capital expenditures | |||||||||||||||||
Upgrade/growth | 18,429 | 9,502 | 94 | 55,015 | 17,097 | nm | |||||||||||
Maintenance | 28,495 | 8,498 | nm | 78,139 | 25,242 | nm | |||||||||||
Proceeds from disposals of property and equipment | — | (1,665) | nm | (46,936) | (4,647) | nm | |||||||||||
Net capital expenditures before acquisitions | 46,924 | 16,335 | nm | 86,218 | 37,692 | nm | |||||||||||
Acquisition of 35 drilling rigs, related equipment, land and buildings | — | 117,928 | nm | — | 117,928 | nm | |||||||||||
Net capital expenditures | 46,924 | 134,263 | (65) | 86,218 | 155,620 | (45) |
nm | - calculation not meaningful |
REVENUE AND OILFIELD SERVICES EXPENSE
Three months ended | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Revenue | |||||||||||
123,364 | 74,469 | 66 | 313,314 | 159,436 | 97 | ||||||
247,432 | 140,309 | 76 | 617,762 | 386,535 | 60 | ||||||
International | 61,754 | 53,800 | 15 | 178,273 | 153,457 | 16 | |||||
Total revenue | 432,550 | 268,578 | 61 | 1,109,349 | 699,428 | 59 | |||||
Oilfield services expense | 314,433 | 198,813 | 58 | 829,836 | 516,049 | 61 |
Revenue for the three months ended
The increase in total revenue during the third quarter of 2022 was primarily due to favourable industry conditions and supportive oil and natural gas commodity prices, increasing demand for oilfield service. A positive foreign exchange translation impact further contributed to the increase in revenue reported in Canadian currency.
CANADIAN OILFIELD SERVICES
Revenue increased 66 percent to
Canadian revenue accounted for 29 percent of the Company's total revenue in the third quarter of 2022 (2021 - 28 percent) and 28 percent (2021 - 23 percent) for the first nine months of 2022.
The Company's Canadian drilling operations recorded 4,009 operating days in the third quarter of 2022, compared to 2,846 operating days for the third quarter of 2021, an increase of 41 percent. For the nine months ended
The operating and financial results for the Company's Canadian operations during the first nine months 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 timing of the acquisition of 35 land-based drilling rigs in the third quarter of 2021. Offsetting the increase in results was the elimination of the
During the first nine months of 2022, the Company transferred four under-utilized drilling rigs into its Canadian operations reserve fleet.
The Company's
The Company's
Drilling rig operating days increased by 61 percent to 4,937 operating days in the third quarter of 2022 from 3,074 operating days in the third quarter of 2021, and increased by 51 percent to 12,902 operating days in the first nine months of 2022 from 8,554 operating days in the first nine months of 2021.
Overall operating and financial results for the Company's
During the first nine months of 2022, the Company sold one cold stacked drilling rig from its
INTERNATIONAL OILFIELD SERVICES
The Company's international operations recorded revenue of
The Company's international operations contributed 14 percent of the total revenue in the third quarter of 2022 (2021 - 20 percent) and 16 percent of the Company's revenue in the first nine months of 2022 (2021 - 22 percent).
International operating days for the three months ended
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 nine months of 2022, the Company sold two cold-stacked drilling rigs located in
DEPRECIATION
Three months ended | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Depreciation | 69,433 | 73,261 | (5) | 208,105 | 213,994 | (3) |
Depreciation expense totaled
GENERAL AND ADMINISTRATIVE
Three months ended | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
General and administrative | 12,759 | 9,996 | 28 | 35,858 | 28,067 | 28 | |||||
% of revenue | 2.9 | 3.7 | 3.2 | 4.0 |
General and administrative expense increased 28 percent to
FOREIGN EXCHANGE AND OTHER (GAIN) LOSS
Three months ended | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Foreign exchange and other (gain) loss | (12,677) | (1,317) | nm | (9,975) | 11,310 | nm |
nm | - calculation not meaningful |
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 | Nine months ended | |||||||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | ||||||||||
Gain on asset sale | (502) | — | nm | (31,798) | — | nm |
nm | - calculation not meaningful |
During the first nine months ended
INTEREST EXPENSE
Three months ended | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Interest expense | 32,438 | 25,536 | 27 | 85,185 | 72,569 | 17 |
Interest expense was incurred on the Company's
Interest expense increased by 27 percent for the third quarter of 2022 compared to the third quarter of 2021. Interest expense increased by 17 percent for the first nine months ended
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 | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Current income taxes (recovery) | 318 | 167 | 90 | (1,444) | 693 | nm | |||||
Deferred taxes income (recovery) | 2,082 | (6,978) | nm | (17,574) | (27,750) | (37) | |||||
Total income taxes (recovery) | 2,400 | (6,811) | nm | (19,018) | (27,057) | (30) | |||||
Effective income tax rate (%) | 11.8 | 16.7 | (29) | 84.5 | 17.6 | nm |
nm | - calculation not meaningful |
The effective income tax rate for the three months ended
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL
($ thousands, except per common share data) | Three months ended | Nine months ended | |||||||||
2022 | 2021 | % change | 2022 | 2021 | % change | ||||||
Cash provided by operating activities | 44,353 | 59,399 | (25) | 198,465 | 139,421 | 42 | |||||
Funds flow from operations | 103,321 | 56,198 | 84 | 261,595 | 144,051 | 82 | |||||
Funds flow from operations per common share | 51 | 65 | |||||||||
Working capital 1 | 136,435 | 104,228 | 31 | 136,435 | 104,228 | 31 |
1 | Comparative figure as at |
During the three months ended
At
INVESTING ACTIVITIES
Three months ended | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Acquisition of 35 drilling rigs, related equipment, land and buildings | — | (117,928) | nm | 0 | (117,928) | nm | |||||
Purchase of property and equipment | (46,924) | (18,000) | nm | (133,154) | (42,339) | nm | |||||
Proceeds from disposals of property and equipment | — | 1,665 | nm | 46,936 | 4,647 | nm | |||||
Distribution to non-controlling interest | — | — | nm | (1,852) | — | nm | |||||
Net change in non-cash working capital | 7,059 | 1,118 | nm | 15,961 | 2,121 | nm | |||||
Cash used in investing activities | (39,865) | (133,145) | (70) | (72,109) | (153,499) | (53) |
nm | - calculation not meaningful |
Net purchases of property and equipment for the third quarter of 2022 totaled
FINANCING ACTIVITIES
Three months ended | Nine months ended | ||||||||||
($ thousands) | 2022 | 2021 | % change | 2022 | 2021 | % change | |||||
Proceeds from long-term debt | 22,585 | 110,595 | (80) | 51,190 | 149,126 | (66) | |||||
Repayments of long-term debt | (17,618) | (18,180) | (3) | (83,012) | (84,743) | (2) | |||||
Lease obligation principal repayments | (1,884) | (1,905) | (1) | (6,073) | (5,132) | 18 | |||||
Interest paid | (16,449) | (11,306) | 45 | (70,336) | (61,157) | 15 | |||||
Purchase of common shares held in trust | (347) | (310) | 12 | (1,127) | (794) | 42 | |||||
Cash used in financing activities | (13,713) | 78,894 | nm | (109,358) | (2,700) | nm |
nm | - calculation not meaningful |
The Company's available bank facilities consist of a
On
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
Covenants
The following is a list of the Company's currently applicable covenants and the calculations as at
Covenant | ||||
The Credit Facility | ||||
Consolidated EBITDA1 | > 140.0 million | 301,516 | ||
Consolidated EBITDA to Consolidated Interest Expense1,2 | ≥ 2.25 | 2.83 | ||
Consolidated Senior Debt to Consolidated EBITDA1,3 | ≤ 3.25 | 2.83 |
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
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
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
NEW BUILDS AND MAJOR RETROFITS
During the first nine months ended
OUTLOOK
Industry Overview
The outlook for oilfield services continues to be positive with steady demand for services and tightening rig supply, particularly in the Company's North American operating segments. Despite the recent pullback in global crude oil commodity prices, demand for crude oil continues to improve year-over-year. Furthermore, OPEC+ nations continue to moderate supply and most recently announced supply cuts to current output, likely further tightening future supply.
Inflationary concerns have continued to prompt central banks to tighten monetary policy. Rising interest rates largely resulting from efforts to quell high inflation have subsequently led to uncertainty for global economies regarding recession risk and contracting economic growth. These factors continue to impact global commodity prices and have led to a recent pullback in commodity prices and increased price volatility. The average benchmark price of West Texas Intermediate ("WTI") was US
We expect crude oil and natural gas demand to remain relatively steady and anticipate that tight supply in a positive commodity price environment may support steady oilfield services activity and drive rate improvements during the remainder of 2022 and into 2023. 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 that may impact supply and demand for, and pricing of crude oil and natural gas and related oilfield services. These factors include but are not limited to, recession risk and global economic health, the impact of ongoing hostilities in
Canadian Activity
Canadian activity, currently representing 28 percent of total Company revenue year to date, improved in the third quarter due to supportive industry conditions. We expect activity to continue to improve over the fourth quarter and into the first quarter of 2023 as operations enter the winter drilling season.
As of
United States Activity
As of
International Activity
International activity, currently representing 16 percent of total Company revenue year to date, remained steady over the third quarter. International activity is expected to strongly improve in the fourth quarter of 2022 and into 2023, as a total of five rigs have been contracted or re-contracted in the Company's
As of
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
Other than as described within this document, the Company's risk factors and management of those risks have not changed substantially from those 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 future business operations or financial condition. If any of the potential events described in the risk factors in this document or the Company's AIF actually occur, or describe events intensify, 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 third quarter 2022 results at
Consolidated Statements of Financial Position
As at |
|
| ||
(Unaudited - in thousands of Canadian dollars) | ||||
Assets | ||||
Current Assets | ||||
Cash | $ 29,994 | $ 13,305 | ||
Accounts receivable | 339,451 | 226,807 | ||
Inventories, prepaid and other | 50,212 | 49,172 | ||
Income taxes receivable | 146 | 580 | ||
Total current assets | 419,803 | 289,864 | ||
Property and equipment | 2,562,613 | 2,512,953 | ||
Deferred income taxes | 193,992 | 174,237 | ||
Total assets | $ 3,176,408 | $ 2,977,054 | ||
Liabilities | ||||
Current Liabilities | ||||
Accounts payable and accruals | $ 274,991 | $ 177,932 | ||
Share-based compensation | 2,352 | 1,055 | ||
Income taxes payable | 971 | 1,389 | ||
Current portion of lease obligation | 5,054 | 5,260 | ||
Total current liabilities | 283,368 | 185,636 | ||
Share-based compensation | 13,139 | 7,966 | ||
Long-term debt | 1,445,514 | 1,453,884 | ||
Lease obligations | 5,631 | 4,327 | ||
Income tax payable | 7,207 | 7,647 | ||
Deferred income taxes | 134,043 | 120,100 | ||
Non-controlling interest | — | 4,832 | ||
Total liabilities | 1,888,902 | 1,784,392 | ||
Shareholders' Equity | ||||
Shareholders' capital | 268,410 | 230,376 | ||
Contributed surplus | 22,929 | 23,197 | ||
Equity component of convertible debenture | — | 2,380 | ||
Accumulated other comprehensive income | 286,535 | 223,308 | ||
Retained earnings | 709,632 | 713,401 | ||
Total shareholders' equity | 1,287,506 | 1,192,662 | ||
Total liabilities and shareholders' equity | $ 3,176,408 | $ 2,977,054 |
Consolidated Statements of Income (Loss)
Three months ended | Nine months ended | |||||||
(Unaudited - in thousands of Canadian dollars, except per common share data) | ||||||||
Revenue | $ 432,550 | $ 268,578 | $ 1,109,349 | $ 699,428 | ||||
Expenses | ||||||||
Oilfield services | 314,433 | 198,813 | 829,836 | 516,049 | ||||
Depreciation | 69,433 | 73,261 | 208,105 | 213,994 | ||||
General and administrative | 12,759 | 9,996 | 35,858 | 28,067 | ||||
Restructuring | — | 697 | — | 4,230 | ||||
Share-based compensation | (5,910) | (440) | 8,049 | 6,382 | ||||
Foreign exchange and other (gain) loss | (12,677) | (1,317) | (9,975) | 11,310 | ||||
Total expenses | 378,038 | 281,010 | 1,071,873 | 780,032 | ||||
Income (loss) before interest expense, accretion of deferred financing charges and other gains and income taxes | 54,512 | (12,432) | 37,476 | (80,604) | ||||
Gain on repurchase of unsecured Senior Notes | — | — | — | (7,431) | ||||
Gain on asset sale | (502) | — | (31,798) | — | ||||
Interest expense | 32,438 | 25,536 | 85,185 | 72,569 | ||||
Accretion of deferred financing charges | 2,200 | 2,702 | 6,601 | 8,109 | ||||
Income (loss) before income taxes | 20,376 | (40,670) | (22,512) | (153,851) | ||||
Income taxes (recovery) | ||||||||
Current income taxes (recovery) | 318 | 167 | (1,444) | 693 | ||||
Deferred income taxes (recovery) | 2,082 | (6,978) | (17,574) | (27,750) | ||||
Total income taxes (recovery) | 2,400 | (6,811) | (19,018) | (27,057) | ||||
Net income (loss) from continuing operations | 17,976 | (33,859) | (3,494) | (126,794) | ||||
Loss from discontinued operations | — | (523) | — | (3,422) | ||||
Net income (loss) | $ 17,976 | $ (34,382) | $ (3,494) | $ (130,216) | ||||
Net income (loss) attributable to: | ||||||||
Common shareholders | 17,782 | (34,398) | (3,769) | (130,240) | ||||
Non-controlling interests | 194 | 16 | 275 | 24 | ||||
17,976 | (34,382) | (3,494) | (130,216) | |||||
Net income (loss) attributable to common shareholders per common share | ||||||||
Basic | $ 0.11 | $ (0.21) | $ (0.02) | $ (0.80) | ||||
Diluted | $ 0.11 | $ (0.21) | $ (0.02) | $ (0.80) |
Consolidated Statements of Cash Flows
Three months ended | Nine months ended | |||||||
(Unaudited - in thousands of Canadian dollars) | ||||||||
Cash provided by (used in) | ||||||||
Operating activities | ||||||||
Net income (loss) | $ 17,976 | $ (34,382) | $ (3,494) | $ (130,216) | ||||
Items not affecting cash | ||||||||
Depreciation | 69,433 | 73,261 | 208,105 | 213,994 | ||||
Gain on asset sale | (502) | — | (31,798) | — | ||||
Gain on purchase of unsecured Senior Notes | — | — | — | (7,431) | ||||
Share-based compensation, net cash settlements | (5,945) | (440) | 6,313 | 6,382 | ||||
Unrealized foreign exchange and other | (14,361) | (3,501) | 8,257 | 8,394 | ||||
Accretion of deferred financing charges | 2,200 | 2,702 | 6,601 | 8,109 | ||||
Interest expense | 32,438 | 25,536 | 85,185 | 72,569 | ||||
Deferred income taxes (recovery) | 2,082 | (6,978) | (17,574) | (27,750) | ||||
Funds flow from operations | 103,321 | 56,198 | 261,595 | 144,051 | ||||
Net change in non-cash working capital | (58,968) | 3,201 | (63,130) | (4,630) | ||||
Cash provided by operating activities | 44,353 | 59,399 | 198,465 | 139,421 | ||||
Investing activities | ||||||||
Acquisition of 35 drilling rigs, related equipment, land and buildings | — | (117,928) | — | (117,928) | ||||
Purchase of property and equipment | (46,924) | (18,000) | (133,154) | (42,339) | ||||
Proceeds from disposals of property and equipment | — | 1,665 | 46,936 | 4,647 | ||||
Distribution to non-controlling interest | — | — | (1,852) | — | ||||
Net change in non-cash working capital | 7,059 | 1,118 | 15,961 | 2,121 | ||||
Cash used in investing activities | (39,865) | (133,145) | (72,109) | (153,499) | ||||
Financing activities | ||||||||
Proceeds from long-term debt | 22,585 | 110,595 | 51,190 | 149,126 | ||||
Repayments of long-term debt | (17,618) | (18,180) | (83,012) | (84,743) | ||||
Lease obligation principal repayments | (1,884) | (1,905) | (6,073) | (5,132) | ||||
Interest paid | (16,449) | (11,306) | (70,336) | (61,157) | ||||
Purchase of common shares held in trust | (347) | (310) | (1,127) | (794) | ||||
Cash (used in) provided by financing activities | (13,713) | 78,894 | (109,358) | (2,700) | ||||
Net (decrease) increase in cash | (9,225) | 5,148 | 16,998 | (16,778) | ||||
Effects of foreign exchange on cash | 225 | (354) | (309) | (3,094) | ||||
Cash – beginning of period | 38,994 | 19,532 | 13,305 | 44,198 | ||||
Cash – end of period | $ 29,994 | $ 24,326 | $ 29,994 | $ 24,326 |
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 principal 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 | Nine months ended | ||||||||
($ thousands) | 2022 | 2021 | 2022 | 2021 | ||||||
Income (loss) before income taxes | 20,376 | (40,670) | (22,512) | (153,851) | ||||||
Add-back/(deduct): | ||||||||||
Interest expense | 32,438 | 25,536 | 85,185 | 72,569 | ||||||
Accretion of deferred financing charges | 2,200 | 2,702 | 6,601 | 8,109 | ||||||
Depreciation | 69,433 | 73,261 | 208,105 | 213,994 | ||||||
Restructuring | — | 697 | — | 4,230 | ||||||
Share-based compensation | (5,910) | (440) | 8,049 | 6,382 | ||||||
Gain on asset sale | (502) | — | (31,798) | — | ||||||
Gain on repurchase of unsecured Senior Notes 1 | — | — | 0 | (7,431) | ||||||
Foreign exchange and other (gain) loss | (12,677) | (1,317) | (9,975) | 11,310 | ||||||
Adjusted EBITDA | 105,358 | 59,769 | 243,655 | 155,312 |
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
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, pandemics, and impacts of geopolitical events such as the hostilities between
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; pandemics; determinations by
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, new pandemics, ongoing hostilities between
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
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.
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