CALGARY, AB, July 29, 2020 /CNW/ - Stampede Drilling Inc.
("Stampede" or the "Corporation") (TSXV: SDI) announces today its
financial and operational results for the three and six month
periods ended June 30, 2020.
The following should be read in conjunction with the
Corporation's unaudited condensed consolidated financial statements
and the notes thereto for the three and six month periods ended
June 30, 2020 and related
management's discussion and analysis, which are available on SEDAR
at www.sedar.com.
All amounts or dollar figures are denominated in thousands of
Canadian dollars except for per share amounts, number of drilling
rigs, and operating days, or unless otherwise noted.
Estimates and forward-looking information are based on
assumptions of future events and actual results may vary from these
estimates. See "Forward-Looking Information" in this press release
for additional details.
SECOND QUARTER 2020 OPERATIONAL OVERVIEW
During the three months ended June 30,
2020, the Corporation recorded an Adjusted EBITDA loss of
from continuing operations of $417,
an increase of $295 from the prior
year comparative period. Reduced global oil demand driven by the
novel coronavirus ("COVID-19") health pandemic and the associated
economic downturn pressured crude and liquid prices to record lows
during the three months ended June 30,
2020, resulting in production shut-ins and minimal drilling
and completion activity in Western
Canada.
In March 2020, the Corporation
implemented key cost and discretionary spending plan adjustments.
For the three month period ended June 30,
2020, Administrative expenses were down 66% as compared to
the corresponding 2019 period. The decrease was achieved by the
elimination of all discretionary spending, non-essential travel,
and entertainment.
For the three months ended June
2020, salary and benefit expenses were down 35% as compared
to the corresponding 2019 period. The decrease in employee expenses
was related to the following:
- 18% to 36% reduction to Executive cash compensation,
- Employee salary reductions, modified work schedules, job
sharing and temporary layoffs
- 100% reduction to Board of Directors cash compensation
|
Three months ended
June 30,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
Administrative
expenses
|
150
|
437
|
(66%)
|
Salaries and
benefits
|
400
|
616
|
(35%)
|
Share-based
payments
|
66
|
245
|
(73%)
|
Depreciation
|
101
|
109
|
(7%)
|
Total
G&A
|
717
|
1,407
|
(49%)
|
In addition, the Corporation qualified for the Canadian Federal
Government's wage subsidy program during Q2 2020 which was used to
reduce employee related salary expenses and help minimize reduction
in headcount. The benefit of $150
resulting from the program has been offset against salaries and
benefits included in general and administrative expenses.
OUTLOOK
Throughout the second quarter crude oil prices continued to
slowly stabilize as lock down measures associated with COVID-19
across the globe gradually eased, increasing the demand for energy.
This combined with coordinated production cuts by OPEC and OPEC+
have helped with world crude oil pricing stability and higher
prices. As demand and production continue to correct themselves,
the Corporation expects increased drilling activity in Western Canada but below historical
levels.
The Corporation is forecasting an increase in drilling and
completion activity following the summer months. However, the
Corporation drilling activity will remain well below prior year
levels in the second half of 2020 as producers protect their
balance sheet. The corporation will continue to actively monitor
and manage risks through periods of lower commodity pricing and
industry activity. As at June 30,
2020, the Corporation was in compliance of all covenants
related to our operating line facility.
|
Covenant
|
June 30,
2020
|
Interest Coverage
Ratio (1)
|
3.00:1.00 or
more
|
7.19:1.00
|
Net Funded Debt to
EBITDA Ratio (2)
|
3.00:1.00 or
less
|
1.41:1.00
|
As at June 30, 2020, $6,801 was drawn on the Corporations total
operating loan facility of $15,000.
With regards to the $2,612
convertible debenture due in October
2020, the Corporation is currently assessing its options to
request holders to extend the maturity date of the debenture or
convert the debenture to equity on the maturity date.
FINANCIAL SUMMARY
SECOND QUARTER 2020 SUMMARY (Compared with the second
quarter 2019)
- Revenue from continuing operations of $275, down 92% from $3,319;
- Gross margin from continuing operations of $133, down 86% from $931;
- Adjusted EBITDA loss from continuing operations of ($417), increased 242% from an Adjusted EBITDA
loss of ($122);
- Net loss from continuing operations of ($1,878), increased 14% from ($1,649);
SIX MONTHS ENDED JUNE 30,
2012 SUMMARY (Compared with the six months ended
June 30, 2019)
- Revenue from continuing operations of $11,165, up 1% from $11,082;
- Gross margin from continuing operations of $3,662, down 15% from 4,291;
- Adjusted EBITDA from continuing operations of $2,167, down 9% from $2,377;
- Net loss from continuing operations of ($743), increased 70% from $438;
|
Three months
ended
June 30,
|
Six months
ended
June 30,
|
(000's CAD $
except per share amounts)
|
2020
|
2019
|
%
Change
|
2020
|
2019
|
%
Change
|
Continuing
operations
|
|
|
|
|
|
|
Revenue
|
275
|
3,319
|
(92%)
|
11,165
|
11,082
|
1%
|
Direct operating
expenses
|
142
|
2,388
|
(94%)
|
7,503
|
6,791
|
10%
|
Gross margin
(1)
|
133
|
931
|
(86%)
|
3,662
|
4,291
|
(15%)
|
Net loss from
continuing operations
|
(1,878)
|
(1,649)
|
14%
|
(743)
|
(438)
|
70%
|
Basic and diluted per
share
|
(0.01)
|
(0.01)
|
nm
|
(0.01)
|
(0.01)
|
nm
|
Adjusted EBITDA
(1)
|
(417)
|
(122)
|
242%
|
2,167
|
2,377
|
(9%)
|
Weighted average
common shares outstanding
|
132,046
|
131,752
|
0%
|
132,046
|
130,184
|
1%
|
Weighted average
diluted common shares outstanding
|
132,046
|
131,752
|
0%
|
132,046
|
130,184
|
1%
|
Combined
operations (2)
|
|
|
|
|
|
|
Net income
|
(1,878)
|
(1,410)
|
33%
|
(743)
|
631
|
(218%)
|
Basic and diluted per
share
|
(0.01)
|
(0.01)
|
nm
|
(0.01)
|
0.01
|
nm
|
Adjusted EBITDA
(1)
|
(417)
|
(509)
|
(18%)
|
2,167
|
691
|
214%
|
Capital
expenditures
|
4
|
3,970
|
(100%)
|
709
|
4,225
|
(83%)
|
nm - not
meaningful
|
|
|
|
(1) Refer to "Non-GAAP Measures" for
further information.
|
|
|
|
(2) Combined operations represent the
aggregated results of both continuing and discontinued
operations.
|
|
|
|
RESULTS OF CONTINUING OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 2012
|
Six months ended
June 30,
|
(000's CAD $
except operating days)
|
2020
|
2019(1)
|
%
Change
|
|
|
|
|
Revenue
|
11,165
|
11,082
|
1%
|
Direct operating
expenses
|
7,503
|
6,791
|
10%
|
Gross margin
(2)
|
3,662
|
4,291
|
(15%)
|
Gross margin
%
|
33%
|
39%
|
(15%)
|
Net loss from
continuing operations
|
(743)
|
(438)
|
70%
|
General and
administrative expenses
|
1,859
|
2,405
|
(23%)
|
Adjusted EBITDA
(2)
|
2,167
|
2,377
|
(9%)
|
Drilling rig
operating days
|
531
|
558
|
(5%)
|
Drilling rig revenue
per day
|
21.0
|
19.9
|
6%
|
Drilling rig
utilization
|
29%
|
38%
|
(24%)
|
CAODC industry
average utilization (3)
|
20%
|
22%
|
(9%)
|
nm - not
meaningful
|
|
|
|
(1) The
comparative period has been restated to reflect discontinued
operations as discussed in Note 5.
|
|
|
|
(2) Refer to "Non-GAAP measures" for
further information.
|
|
|
|
- Revenue in the first six months of 2020 was $11,165, an increase of $83 (1%) compared to $11,082 in the first six months of 2019. The
slight increase was as a result of a strong first quarter in 2020
as the Company did not have any operating days in Q2 2020. Q2 2020
revenue of $275 was related to US
management services and Canadian third party rebills back to
customers. Drilling revenue per day in the first quarter of 2020
remained consistent with the drilling revenue per day in the first
quarter of 2019.
- The Corporation had a total of 531 operating days in the first
six months of 2020, a decrease of 27 operating days (5%) from the
558 operating days in the corresponding 2019 period. All 531
operating days occurred in Q1 2020. The drilling rig utilization
for the first six months of 2020 was 29%, 45% above the first six
months CAODC industry average utilization rate of 20% for 2020. The
CAODC industry utilization rate for Q2 2020 was 3.75%.
- Gross margin for the six months ended June 30, 2020 was 33%, down 15% from 39% as
compared to the corresponding 2019 period. The decrease was related
to higher direct operating expenses from repair and maintenance
expenses and higher startup costs for rigs that began operations in
the first quarter of 2020. 2020 gross margins were also negatively
impacted by fixed costs in Q2 2020 with no corresponding operating
activity.
- For the six month period ended June 30,
2020, the net loss from continuing operations was
$743 up $305 (70%) from $438 as compared to the corresponding 2019
period. For the six month period ended June
30, 2020, Adjusted EBITDA was $2,167 down $210
(9%) from $2,377 as compared to the
corresponding 2019 period. For the first six months of 2020, Net
income and Adjusted EBITDA from continuing operations were
negatively impacted due to the minimal drilling activity in Q2
2020.
- For the six months ended June 30,
2020, general and administrative expenses were $1,859 down $546
(23%) from $2,405 as compared to the
corresponding 2019 period. The 2020 decrease in general and
administrative expenses was as a result of the Corporations cost
cutting initiatives implemented in March
2020.
SECOND QUARTER RESULTS OF CONTINUING OPERATIONS
|
Three months ended
June 30,
|
(000's CAD $
except per day amounts)
|
2020
|
2019(1)
|
%
Change
|
|
|
|
|
Drilling rig
revenue
|
275
|
3,319
|
(92%)
|
Direct operating
expenses
|
142
|
2,388
|
(94%)
|
Gross margin
(2)
|
133
|
931
|
(86%)
|
Gross margin
%
|
48%
|
28%
|
71%
|
Net loss from
continuing operations
|
(1,878)
|
(1,649)
|
14%
|
General and
administrative expenses
|
717
|
1,407
|
(49%)
|
Adjusted EBITDA
(2)
|
(417)
|
(122)
|
242%
|
Drilling rig
operating days
|
-
|
180
|
(100%)
|
Drilling rig revenue
per day
|
-
|
18.4
|
(100%)
|
Drilling rig
utilization
|
0%
|
24%
|
nm
|
CAODC industry
average utilization (3)
|
4%
|
15%
|
(73%)
|
nm - not
meaningful
|
|
|
|
(1) The
comparative period has been restated to reflect discontinued
operations as discussed in Note 4.
|
|
|
|
(2) Refer to "Non-GAAP measures" for
further information.
|
|
|
|
- For the three months ended June 30,
2020, revenue was $275, a
decrease of $3,044 (92%) from
$3,319 compared to the corresponding
2019 period. The decrease was due to zero drilling activity related
to the collapse of oil pricing in Q2 2020. The Q2 2020 revenue was
related to US management services and Canadian third party rebills
back to customers.
- For the three months ended June 30,
2020, the Corporation had zero operating days. CAODC
industry average utilization rate for the three months ended
June 30, 2020 was 3.75%, down 73%
from 15% for the corresponding 2019 period.
- For the three months ended June 30,
2020, gross margin as a percentage of revenue was 48%, an
increase of 71% from 28% as compared to the corresponding 2019. The
increase in gross margin was due to higher margin work related to
the US revenue for management services and third party rebills back
to customers.
- For the three months ended June 30,
2020, net loss from continuing operations of $1,878 was up $229
(14%) from a net loss of $1,649
compared to the corresponding 2019 period. For the three months
ended June 30, 2020, Adjusted EBITDA
loss was $417, up $295 (242%) from $122 as compared to the corresponding 2019
period. Net loss and Adjusted EBITDA loss from continuing
operations were negatively impacted by the overall decrease in Q2
2020 activity.
- For the three months ended June 30,
2020, general and administrative expenses were $717 down $690
(49%) from $1,407 for the comparable
2019 period. The primary reasons for the overall decrease was
related to the cost cutting initiatives implemented in March 2020 due to price collapse of oil and
COVID-19.
NON-GAAP MEASURES
This press release contains references to (i) Adjusted EBITDA
and (ii) gross margin. These financial measures are not measures
that have any standardized meaning prescribed by IFRS and are
therefore referred to as non-GAAP (Generally Accepted Accounting
Principles) measures. The non-GAAP measures used by the Corporation
may not be comparable to similar measures used by other
companies.
(i)
|
Adjusted EBITDA is
defined as "income (loss) from operations before interest income,
interest expense, taxes, transaction costs, depreciation and
amortization, share-based compensation expense, gains on disposal
of property and equipment, impairment expenses, other income,
foreign exchange, non-recurring restructuring charges, finance
costs, accretion of debentures and other income/expenses, and any
other items that the Corporation considers appropriate to adjust
given the irregular nature and relevance to comparable operations."
Management believes that in addition to net and total comprehensive
income (loss), Adjusted EBITDA is a useful supplemental measure as
it provides an indication of the results generated by the
Corporation's principal business activities prior to consideration
of how these activities are financed, how assets are depreciated,
amortized and impaired, the impact of foreign exchange, or how the
results are affected by the accounting standards associated with
the Corporation's stock-based compensation plan. Investors should
be cautioned, however, that Adjusted EBITDA should not be construed
as an alternative to net income (loss) and comprehensive income
(loss) determined in accordance with IFRS as an indicator of the
Corporation's performance. The Corporation's method of calculating
Adjusted EBITDA may differ from that of other organizations and,
accordingly, its Adjusted EBITDA may not be comparable to that of
other companies.
|
|
Three months
ended
June 30,
|
|
Six months
ended
June 30,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
|
2020
|
2019
|
%
Change
|
Net loss from
continuing operations
|
(1,878)
|
(1,649)
|
14%
|
|
(743)
|
(438)
|
70%
|
Depreciation
(1)
|
1,233
|
1,114
|
11%
|
|
2,425
|
2,160
|
12%
|
Finance
costs
|
157
|
152
|
3%
|
|
378
|
327
|
16%
|
Other
income
|
(18)
|
(53)
|
(66%)
|
|
(42)
|
(95)
|
(56%)
|
Gain from equipment
lost in hole
|
-
|
-
|
nm
|
|
-
|
(15)
|
(100%)
|
Share-based
payments
|
66
|
245
|
(73%)
|
|
161
|
274
|
(41%)
|
Transaction
costs
|
-
|
47
|
(100%)
|
|
-
|
146
|
(100%)
|
Foreign exchange gain
(loss)
|
23
|
22
|
5%
|
|
(12)
|
18
|
(167%)
|
Adjusted
EBITDA
|
(417)
|
(122)
|
242%
|
|
2,167
|
2,377
|
(9%)
|
nm - not
meaningful
|
|
|
|
|
|
|
|
(1) Includes depreciation of property
and equipment and right-of-use assets
|
|
(ii)
|
Gross margin is
defined as "gross profit from services revenue from continuing
operations before stock-based compensation and depreciation". Gross
margin is a measure that provides shareholders and potential
investors additional information regarding the Corporation's cash
generating and operating performance. Management utilizes this
measure to assess the Corporation's operating performance.
Investors should be cautioned, however, that gross margin should
not be construed as an alternative to net income (loss) and
comprehensive income (loss) determined in accordance with IFRS as
an indicator of the Corporation's performance. The Corporation's
method of calculating gross margin may differ from that of other
organizations and, accordingly, its gross margin may not be
comparable to that of other companies
|
|
Three months
ended
June 30,
|
|
Six months
ended
June 30,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
|
2020
|
2019
|
%
Change
|
Income from
operations
|
(999)
|
(74)
|
1,250%
|
|
1,440
|
2,348
|
(39%)
|
Depreciation of
property and equipment
|
1,132
|
1,005
|
13%
|
|
2,222
|
1,943
|
14%
|
Gross
margin
|
133
|
931
|
(86%)
|
|
3,662
|
4,291
|
(15%)
|
Gross margin
%
|
48%
|
28%
|
71%
|
|
33%
|
39%
|
(15%)
|
nm - not
meaningful
|
|
|
|
|
|
|
|
FORWARD-LOOKING INFORMATION
Certain statements contained in this press release constitute
forward-looking statements or forward-looking information
(collectively, "forward-looking information"). Forward-looking
information relates to future events or the Corporation's future
performance. All information other than statements of historical
fact is forward-looking information. The use of any of the words
"plan", ""continue", "estimate", "expect", "intend", "might",
"may", "will", "should", "believe", "predict", and "forecast" are
intended to identify forward-looking information. This press
release contains forward-looking information pertaining to, among
other things: the Corporation's expectation that the slow
stabilization of crude oil prices as a result of the gradual easing
of lock down measures associated with COVID-19 across the globe,
combined with coordinated production cuts by OPEC and OPEC+, will
increase the demand for energy, therefore, increasing drilling and
completion activity in Western
Canada; the Corporation's expectations regarding the impact
on macro-economic factors of the COVID-19 virus, of instability
created by OPEC's inability to maintain the global oil supply and
the resulting impact of both on commodity prices; the effect of
measures implemented by the Corporation to protect its field and
office employees while ensuring business continuity; the
Corporation's capital expenditure budget for 2020 and expected
responses to COVID-19 and commodity pricing; the Corporation's
ability to withstand the impact the current commodity price cycle
will have on its forecasted activity levels for the remainder of
2020 and into 2021; the belief that the Corporation's principal
sources of liquidity, its operating cash flows and operating loan,
will be sufficient to fund 2020 operations and other strategic
opportunities as well as manage its liquidity risk; the
Corporation's anticipation that it will have the ability to adjust
its capital structure by issuing new equity or debt, disposing of
assets and making adjustments to its operating expenditures and
capital expenditure program; the Corporation's belief that it has
adequate access to its demand loan facility to provide the
necessary liquidity needed to manage fluctuations in the timing of
receipt and/or disbursement of operating cash flows; the
Corporation's expectations that its financial risk management
policies will ensure that all payables are paid within the
pre-agreed credit terms; the Corporation's treatment and
categorization of doubtful accounts and expectations regarding
credit loss rates based on its past experiences and expectations in
respect of certain receivables; the Corporation's assessment of its
customers' creditworthiness; the ability of the Corporation to
extend the maturity date of its $2,612 convertible debenture due in October 2020, or to convert the debenture to
equity on the maturity date; and the expected effects of
seasonality and weather on the Corporation's operations and
business, amongst others.
Forward-looking information is presented in this press release
for the purpose of assisting investors and others in understanding
certain key elements of the Corporation's financial results and
business plan, as well as the objectives, strategic priorities and
business outlook of the Corporation, and in obtaining a better
understanding of the Corporation's anticipated operating
environment. Readers are cautioned that such forward-looking
information may not be appropriate for other purposes.
Forward-looking information, by its very nature, is subject to
inherent risks and uncertainties and is based on many assumptions,
both general and specific, which give rise to the possibility that
actual results or events could differ materially from the
expectations of the Corporation expressed in or implied by such
forward-looking information and that the Corporation's business
outlook, objectives, plans and strategic priorities may not be
achieved. Macro-economic conditions, including public health
concerns (including the impact of the COVID-19 pandemic) and other
geopolitical risks, the condition of the global economy and,
specifically, the condition of the crude oil and natural gas
industry including the collapse of global crude oil prices, other
commodity prices and the decrease in global demand for crude oil in
2020, and the ongoing significant volatility in world markets may
adversely impact drilling and completions programs, which could
materially adversely impact the Corporation. In addition to other
factors and assumptions which may be identified in this press
release, assumptions have been made regarding, among other things:
the condition of the global economy, including trade, public health
(including the impact of the COVID-19 pandemic) and other
geopolitical risks; the stability of the economic and political
environment in which the Corporation operates; the effect the
stabilization of global crude prices will have on drilling and
completion activities in Western
Canada; the success of the measures implemented by the
Corporation to protect its field and office employees and the
ability to ensure business continuity at the same time; the
creditworthiness of the Corporation's customers; the effectiveness
of the Corporation's financial risk management policies at ensuring
all payables are paid within the pre-agreed credit terms; the
ability of the Corporation to retain qualified staff; the ability
of the Corporation to obtain financing on acceptable terms; the
impact of increasing competition; the ability to protect and
maintain the Corporation's intellectual property; currency,
exchange and interest rates; the regulatory framework regarding
taxes and environmental matters in the jurisdictions in which the
Corporation operates; and the ability of the Corporation to
successfully implement key cost and discretionary spending plan
adjustments. Actual results and future events could differ
materially from those expected or estimated in such forward-looking
information. As a result, the Corporation cannot guarantee that any
forward-looking information will materialize and we caution you
against relying on any of this forward-looking information.
Accordingly, readers should not place undue reliance on
forward-looking information.
Additional information on these and other factors are disclosed
under the heading "Risks and Uncertainties" herein, in the
Corporation's annual information form dated March 25, 2020, and in other reports filed with
the securities regulatory authorities in Canada from time to time and available on
SEDAR (sedar.com).
Statements, including forward-looking information, are made as
of the date of this press release and the Corporation does not
undertake any obligation to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws. The forward-looking information contained in this press
release is expressly qualified by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this press release.
SOURCE Stampede Drilling Inc.