CALGARY, March 7, 2018 /CNW/ - AKITA Drilling Ltd.'s net
loss for the year ended December 31,
2017 was $39,177,000 (net loss
of $2.18 per share (basic and
diluted)) on revenue of $71,198,000
compared to net income of $5,329,000
or $0.30 earnings per share (basic
and diluted) on revenue of $61,061,000 in 2016. Included in the 2017
net loss is an asset decommissioning and impairment expense of
$29,123,000 (after tax effect of
$15,320,000 or $0.85 per share). 2016 results included
significant contract cancellation revenue of $28,250,000 ($20,609,000 after tax). Net loss from routine
operations in 2017 totalled $23,857,000 (2016 - $15,280,000). Funds flow from operations for the
current year was $6,607,000 compared
to $34,500,000 ($13,891,000 net of contract cancellation revenue)
in 2016, while net cash from operating activities for 2017 was
$3,724,000 compared to $11,892,000 in 2016.
The Canadian drilling industry saw significant activity
improvements in 2017 with utilization improving to an annual
industry average of 30% from 17% in 2016. AKITA's utilization rose
to 36% in 2017 from 14% in 2016. This improvement in activity was
driven by higher prices for crude oil which steadily increased
throughout 2017. The increase in activity was spread across several
rig categories for the Company, with pad triples, pad doubles,
conventional doubles and conventional singles all more than
doubling their operating days in 2017 compared to 2016. Triple pad
rigs were the most active category for the Company generating 65%
of the Company's operating days. These rigs are primarily focussed
in the SAGD/Heavy Oil segments of the Canadian market.
Despite the significant escalation in drilling activity in 2017
over 2016, there is still more supply than demand for rigs which is
resulting in low pricing for drilling services. The Company's
revenue per operating day decreased to $26,704 in 2017 from $31,447 in 2016. This 15% drop had a significant
impact on the Company's earnings as well as funds flow from
operations. The decrease in revenue per day for the Company was a
result of a change in the mix of rigs that operated in the year.
Without a significant shift in demand for rigs or a reduction in
the Canadian rig fleet, AKITA does not anticipate any significant
price increases in the near future.
On November 21, 2017, the Canadian
Association of Oilwell Drilling Contractors ("CAODC") released its
2018 industry drilling forecast, estimating 32% average rig
utilization up slightly from the 30% actual average rig utilization
in 2017, and 6,138 wells in 2018, up from 6,031 in 2017. The 2018
forecast was based upon commodity price assumptions of US
$52.50 per barrel for crude oil and
CAD $2.35 per mcf for natural gas.
Based on the CAODC forecast it would appear that 2018 will be very
similar to 2017. Without improvements to the existing takeaway
capacity in Canada, the Canadian
market may see limited growth.
AKITA began looking for growth opportunities in other
geographical markets in 2017 due to the low activity and low profit
margins prevailing in the Canadian market. After evaluating several
potential alternatives, the Company created a United States subsidiary to pursue
opportunities in the most active basin in North America, the Permian Basin. In December
of 2017 the Company moved a state of the art rig into Odessa Texas and began marketing the rig to
operators in the area. This rig has subsequently been contracted to
a major USA operator. AKITA's
expansion into the USA presents an
exciting opportunity for the Company, with significant growth
potential.
Selected information from AKITA Drilling Ltd.'s Management's
Discussion and Analysis for the Annual Report is as
follows:
Fleet and Utilization
Oil and gas contract drilling activity is cyclical and is
affected by numerous factors, most importantly world crude oil
prices and North American natural gas prices. Overall demand
for AKITA's drilling services improved in 2017 compared to
2016.
Driving the increase in activity was the steady increase in oil
prices through 2017, with the average West Texas Intermediate
("WTI") price increasing 18% in 2017 compared to 2016. Average
Alberta natural gas prices also
improved 6% in 2017 over 2016. Improved prices for both crude oil
and natural gas led to increased capital spending by AKITA's
customers, many of whom had scaled back their drilling programs in
2016.
At the same time both industry and AKITA utilization levels
increased in 2017, the Western Canadian Sedimentary Basin ("WCSB")
rig count continued to decline, dropping 6% in 2017 compared to
2016. The decrease in rig count contributed to the improvement in
industry utilization; increased activity was the prime driver of
the utilization increase. AKITA's drilling fleet of 27 rigs in
Canada represented 4.5% of the
total Canadian drilling fleet at December
31, 2017 (December 31, 2016 –
4.2%).
Utilization rates are a key statistic for the drilling industry
since they directly affect total revenue and influence
pricing. During 2017, AKITA achieved 3,659 operating days,
which corresponds to an annual utilization rate of 36%, compared to
2016 utilization of 14% (1,583 days), and a 2017 industry average
of 30%. Historically AKITA's utilization has been above industry
standard due to the higher than average number of pad rigs in
AKITA's fleet. Pad rigs typically have higher utilization than
conventional rigs as pad drilling is a more efficient way to drill
multiple wells without needing trucks to move.
In 2017, the Company built and deployed an AC heavy double pad
rig that commenced operations in the third quarter of 2017. AKITA
also decommissioned one conventional triple rig during the
year.
|
|
|
|
2017 Fleet
Changes
|
|
Gross
|
Net
|
Number of rigs at
December 31, 2016
|
|
28
|
26.750
|
Construction of heavy
double pad rig
|
|
1
|
1.000
|
Decommissioning of
rig
|
|
(1)
|
(1.000)
|
Number of rigs at
December 31, 2017
|
|
28
|
26.750
|
Revenue per day
The decrease in revenue per day in 2017 was directly related to
lower day rates in the industry. Despite the decrease in the WCSB
rig count, there is still an oversupply of rigs compared to demand
in Canada and therefore rates
remain very low. In contrast, activity levels in the United States have reached a level where
day rates are increasing. AKITA moved a high spec rig to the U.S.
Permian Basin in the fourth quarter of 2017 to take advantage of
high demand in that market.
Seasonality
The drilling industry in Canada
is seasonal, with activity typically building in the fall and
peaking during the winter months, at which time areas with muskeg
conditions freeze sufficiently to allow the movement of rigs and
other heavy equipment. The peak drilling season ends with
"spring break-up", at which time drilling operations are curtailed
due to seasonal road bans (temporary prohibitions on road use) and
restricted access to agricultural land.
Revenue and Operating & Maintenance Expenses
$Millions
|
|
2017
|
2016
|
Change
|
% Change
|
AKITA contract
drilling revenue
|
|
71.2
|
61.0
|
10.2
|
17%
|
AKITA operating &
maintenance expenses
|
|
62.2
|
24.2
|
38.0
|
157%
|
|
|
|
|
|
|
$Dollars
|
|
2017
|
2016
|
Change
|
% Change
|
AKITA and Joint
Ventures' revenue per operating day(1)
|
|
26,704
|
31,447
|
(4,743)
|
(15%)
|
AKITA and Joint
Ventures' operating & maintenance
expenses per operating day (1)
|
|
22,226
|
22,015
|
211
|
1%
|
(1)
|
AKITA and Joint
Ventures' revenue per operating day and AKITA and Joint Ventures'
operating & maintenance expenses per operating day are non-GAAP
financial measures. See commentary in "Basis of Analysis in
this MD&A, Non-GAAP and Additional GAAP Items".
|
Revenue of $71,198,000 in 2017 was
17% higher than 2016 revenue of $61,061,000, due to increased activity in 2017.
Excluding the 2016 contract cancellation revenue of $28,250,000, revenue directly related to drilling
activities increased 117% in 2017 compared to 2016 ($71,198,000 in 2017 from $32,811,000 in 2016). This increase in activity
is also reflected in the 131% increase in operating days between
the two years. Revenue per operating day including AKITA's share of
revenue from its joint ventures was $26,704 per day in 2017, down 15% from
$31,447 in 2016. The drop in revenue
per day in 2017 corresponded to an increased number of lower margin
rigs working in 2017 than in 2016 for AKITA. AKITA's share of
revenue from its joint ventures was included in the per day amounts
as AKITA provides the same drilling services through its joint
venture rigs as it does its wholly-owned rigs.
Operating and maintenance costs are tied to activity levels and
increased to $62,156,000 in 2017 from
$24,169,000 in 2016. On a per day
basis, when including AKITA's portion of joint venture expense
operating costs per day in 2017 remained consistent with the prior
year, increasing only 1% in 2017 over 2016.
AKITA provided drilling services to 35 different customers in
2017 (2016 - 29 different customers), including two customers that
each provided more than 10% of AKITA's revenue for the year (2016 –
three customers).
Depreciation and Amortization Expense
$Millions
|
|
2017
|
2016
|
Change
|
% Change
|
Depreciation and
amortization expense
|
|
27.1
|
24.0
|
3.1
|
13%
|
Drilling rigs are generally depreciated using the unit of
production method. Depreciation is typically calculated for
each rig's major components resulting in an average useful life of
3,600 operating days per rig, subject to annual minimum imputed
activity levels. In certain instances where rigs are inactive
for extended periods, the Company's depreciation rate is
accelerated. Major rig upgrades are depreciated over the
remaining useful life of the related component or to the date of
the next major upgrade, whichever is sooner. Major rig
inspection and overhaul expenditures are depreciated on a
straight-line basis over three years.
The increase in depreciation and amortization expense to
$27,126,000 during 2017 from
$23,959,000 during 2016 was
attributable to more operating days in 2017. On a per operating day
basis, depreciation decreased to $7,414 per operating day in 2017 from
$9,153 per operating day in 2016 as a
result of fewer inactive rigs incurring depreciation relating to
minimum imputed activity levels in 2017. Drilling rig depreciation
accounted for 96% of total depreciation and amortization expense in
2017 (2016 – 96%).
Selling and Administrative Expenses
$Millions
|
|
2017
|
2016
|
Change
|
% Change
|
Selling and
administrative expenses
|
|
13.7
|
12.5
|
1.2
|
9%
|
Selling and administrative expenses increased to $13,659,000 in 2017 from $12,502,000 in 2016. The increase in 2017
is related to higher business development costs as well as higher
personnel costs.
Selling and administrative expenses equated to 19% of revenue in
2017, compared to 20.5% of revenue in 2016, as a result of the
increase in revenue and the fixed nature of the majority of selling
and administrative expenses.
The single largest component of selling and administrative
expenses was salaries and benefits which accounted for 51% of these
expenses in 2017 (2016 – 55%).
Asset Decommissioning and Impairment
$Millions
|
|
2017
|
2016
|
Change
|
% Change
|
Asset impairment
loss
|
|
16.0
|
0.0
|
16.0
|
N/A
|
Asset decomissioning
loss
|
|
13.1
|
0.0
|
13.1
|
N/A
|
Asset decomissioning
and inpairment loss
|
|
29.1
|
0.0
|
29.1
|
N/A
|
International Accounting Standard 36, "Impairment of Assets",
requires an entity to consider both internal and external factors
when assessing whether there are indications of asset impairment at
each reporting period. While the Company did not determine any
internal indicators of impairment at December 31, 2017, it did determine one external
indicator of impairment at that date: the lack of an increase in
market rates in the drilling industry despite both increases to
both drilling activity and oil prices over the prior year. The
resulting lower drilling rates for longer forecast prompted the
Company to perform an impairment analysis on its CGUs which include
the following:
- Hydraulic Singles;
- Heavy Singles;
- Tele-Doubles;
- Heavy Triples;
- A.C. Tele-Double Pad Rigs;
- A.C. Oil Sands Pad Rigs;
- D.C. Pad Rigs; and
- A.C. Deep Gas Pad Rigs.
As at December 31, 2017, the
recoverable amounts of these CGUs were determined as the higher of
fair value less cost of disposal and the value-in-use basis. Fair
value less cost of disposal was determined through the use of
appraisals prepared in December 2017
by independent third party valuation experts. Value-in-use was
calculated using the discounted cash flow for each CGU using the
Company's 2018 budget and business plan as well as internal
forecasts as the bases of the calculation of discounted cash flows.
These tests indicated that certain of the Company's CGUs carrying
amounts exceeded their recoverable amounts, resulting in impairment
losses in 2017 of $16,000,000 (2016 –
nil).
The amounts in excess of the recoverable amounts for each of the
Company's CGUs that were impaired at December 31, 2017 were as follows:
CGU
|
Impairment
Amount
|
Basis for
Recoverable Amount
|
|
|
|
Hydraulic
Singles
|
2,500,000
|
Fair value less costs
to dispose
|
Heavy
Singles
|
1,000,000
|
Value in
use
|
Tele-Doubles
|
3,500,000
|
Fair value less costs
to dispose
|
AC Deep Gas Pad
Rigs
|
8,000,000
|
Fair value less costs
to dispose
|
DC Pad
Rigs
|
1,000,000
|
Fair value less costs
to dispose
|
Total
|
$
16,000,000
|
|
The assumptions used in the value-in-use impairment tests were
based on the Company's board approved 2018 budget and business plan
covering a three year period and applied an average growth rate
ranging from 0% to 5% over a 10 year period depending on the CGU
being analyzed. In forecasting its projected cash flows the Company
assumed that current market conditions will persist into the
future. The Company assumed a pre-tax discount rate of 13%, in
order to calculate the present value of projected cash flows.
Determination of this discount rate included analysis of the cost
of debt and equity for the Company and the Canadian drilling
industry incorporating a risk premium based on current market
conditions. This valuation has a fair value hierarchy of Level
3.
Asset impairment testing is subject to numerous assumptions,
inherent risks and uncertainties, both general and specific, and
the risk that the predictions will not be realized. As a
result, the following sensitivity analysis has been performed to
recognize that additional outcomes are possible:
- Reduced future revenue assumptions by 10%;
- Increased inflation for cash outflows to 5%; and
- Increased the pre-tax discount rate from 13% to 16%.
As rigs are long lived assets, no sensitivity adjustment was
made for the projected forecast period.
The sensitivity tests resulted in reductions to the various rig
CGUs' values in use ranging from $680,000 to $13,800,000. As the base case test
represented management's best estimates, these sensitivity
reductions were not included in the asset impairment loss
reported.
In the fourth quarter of 2017 the Company performed a detailed
review of its property, plant and equipment in light of a
forecasted lower for longer demand for drilling rigs in the WCSB.
The review resulted in a non-cash asset decommissioning expense of
$13,123,000 (2016 – nil) relating to
older spare equipment with uncertain future value.
Equity Income from Joint Ventures
Equity income from joint ventures is comprised of the
following.
$Millions
|
|
2017
|
2016
|
Change
|
% Change
|
Proportionate share
of revenue from joint ventures
|
|
26.5
|
17.0
|
9.5
|
56%
|
Proportionate share
of operating & maintenance
expenses from joint ventures
|
|
19.2
|
10.7
|
8.5
|
79%
|
Proportionate share
of selling and administrative
expenses from joint ventures
|
|
0.4
|
0.2
|
0.2
|
104%
|
Equity income from
joint ventures
|
|
6.9
|
6.1
|
0.8
|
14%
|
The Company provides the same drilling services and utilizes the
same management, financial and reporting controls for its joint
venture activities as it does for its wholly-owned
operations. The analyses of these activities are incorporated
throughout the relevant sections of this MD&A relating to
increased activity, revenue per day as well as operating
expenses.
Other Income (Loss)
$Millions
|
|
2017
|
2016
|
Change
|
% Change
|
Interest
income
|
|
0.4
|
1.0
|
(0.6)
|
(59%)
|
Interest
expense
|
|
(0.2)
|
(0.2)
|
(0.0)
|
23%
|
Gain on sale of
assets
|
|
0.2
|
0.1
|
0.1
|
122%
|
Net other
gains
|
|
0.3
|
0.1
|
0.2
|
103%
|
Total other income
(loss)
|
|
0.7
|
1.0
|
(0.3)
|
33%
|
Interest income decreased to $439,000 in 2017 from $965,000 in 2016 due primarily to less interest
accrued on the receivable related to the contract cancellation
revenue as the Company continued to collect the outstanding
receivable.
During 2017, the Company recorded interest expense of
$168,000 (2016 – $163,000) related to the future cost of the
Company's unfunded defined benefit pension plan.
During 2017, the Company disposed of non-core assets resulting
in a gain of $194,000 (2016 – gain of
$90,000).
In 2017, amounts reported as "Net Other Gains" of $232,000 included $119,000 in income from the sale of previously
written off equipment. In 2016, "Net Other Gains" of $148,000 related to various miscellaneous
income.
Income Tax Expense (Recovery)
$Millions, Except
Income Tax Rate (%)
|
|
2017
|
2016
|
Change
|
% Change
|
Current tax
recovery
|
|
(3.0)
|
(2.3)
|
(0.7)
|
(30%)
|
Deferred tax expense
(recovery)
|
|
(11.1)
|
4.5
|
(15.6)
|
(346%)
|
Total income tax
expense (recovery)
|
|
(14.1)
|
2.2
|
(16.3)
|
(739%)
|
Effective income tax
rate
|
|
26.8%
|
29.2%
|
|
|
AKITA had an income tax recovery of $14,053,000 in 2017 compared to a tax expense of
$2,206,000 in 2016. The change in
current tax recovery resulted from a slightly higher loss for tax
purposes in the year when comparing 2017 to 2016. The decrease in
deferred tax is result of the asset impairment and decommissioning
expense recorded in 2017 that reduced the Company's future tax
liability.
Net Income (Loss), Funds Flow and Net Cash from Operating
Activities
$Millions
|
|
2017
|
2016
|
Change
|
% Change
|
Net Income
(Loss)
|
|
(39.2)
|
5.3
|
(44.5)
|
839%
|
Funds Flow from
Operations(1)
|
|
6.6
|
34.5
|
(27.9)
|
(81%)
|
|
|
(1)
|
Funds flow from
operations is an additional GAAP measure under IFRS. See
commentary in "Basis of Analysis in this MD&A, Non-GAAP and
Additional GAAP Items".
|
During 2017, the Company recorded a net loss of $39,177,000 (net loss of $2.18 per Class A Non-Voting and Class B Common
Share (basic and diluted)) compared to net income of $5,329,000 (net income of $0.30 per Class A Non-Voting and Class B Common
Share (basic and diluted)) in 2016. The material difference in net
income from 2017 and 2016 is largely attributable to the asset
decommissioning and impairment expense in 2017 of $29,123,000 and $28,500,000 revenue from contract cancellation
AKITA received in 2016. Funds flow from operations decreased to
$6,607,000 in 2017 from $34,500,000 in 2016.
Both net income and funds flow from operations were impacted by
the low revenue per operating day in 2017. With revenue per day
down 15% in 2017 from already reduced rates in 2016 and operating
costs per day up 1% over the same time frame, the Company saw
record low operating profits despite the activity for the year.
Liquidity and Capital Resources
At December 31, 2017, AKITA had
$15,528,000 in working capital
including $560,000 in cash and no
bank indebtedness, compared to a working capital of $34,907,000, including $14,250,000 in cash at December 31, 2016. In 2017, AKITA generated
$5,074,000 cash from operating
activities. Cash was also generated from joint venture
distributions ($6,095,000), from
reductions in cash balances restricted for loan guarantees
($1,444,000) and from proceeds on
sales of assets ($221,000).
During the same period, cash was used for capital expenditures
($20,569,000)(1) and
payment of dividends ($6,100,000)(1). Accounts payable at
year end included $9,401,000 in
accrued expenses, half of which related to routine operations while
the other half related to one-time items such as the expense
related to the changes in Saskatchewan PST as well as the cost to
move a rig from Canada to the
US.
(1) Readers should be
aware that the use of cash in any given period for capital
expenditures or payment of dividends does not necessarily coincide
with the accounting treatment when reported on an accrual
basis.
|
The Company chooses to maintain a conservative Statement of
Financial Position due to the cyclical nature of the
industry. In addition to its cash balances, the Company has
an operating loan facility with its principal banker totaling
$50,000,000 that is available until
2019. The interest rate on the facility is 1.25% over prime
interest rates or 2.50% over guaranteed notes, depending on the
preference of the Company. The Company had no borrowings from
this facility at December 31,
2017.
The credit facility has the following financial covenant:
- EBITDA(1) to interest expense shall not be less than
2.00 to 1.
The borrowing base of the new facility is calculated on:
- 75% of good accounts receivable(1); plus
- 40% of the aggregate book value of the consolidated eligible
fixed assets(1).
(1)
|
Readers should be
aware that each of the EBITDA, interest expense, good accounts
receivable and consolidated eligible fixed assets have specifically
set out definitions in the loan facility agreement and are not
necessarily defined by or consistent with either GAAP or
determinations by other users for other purposes.
|
From time to time, the Company makes major purchases from
non-Canadian suppliers in connection with its capital
expenditures. AKITA purchases forward currency contracts in
order to minimize the risk of currency translation adjustments
associated with these purchases. At December 31, 2017 and 2016, the Company did not
have any forward currency contracts.
The Company did not have an outstanding normal course issuer bid
during 2017 or 2016.
The following table provides a summary of contractual
obligations for the Company:
Contractual
Obligations
|
|
Total
|
Less than
1 year
|
1 - 3
years
|
4 - 5
years
|
After
5 years
|
($Thousands)
|
|
Operating leases
(1)
|
|
1,675
|
825
|
850
|
Nil
|
Nil
|
Purchase
obligations
|
|
650
|
325
|
325
|
Nil
|
Nil
|
Capital expenditure
commitments
|
|
2,532
|
2,532
|
Nil
|
Nil
|
Nil
|
Long-term pension
obligations
|
|
4,832
|
Note
|
Note
|
Note
|
Note
|
Total contractual
obligations
|
|
9,689
|
-
|
-
|
Nil
|
Nil
|
|
|
(1)
|
In 2017, the annual
cost for this lease is $810,000. The lease expires on
December 31, 2019.
|
|
|
|
Note: Timing of
pension payments is dependent upon retirement dates for respective
employees. The cost for year one ranges from $90,000 to $191,000,
for year two from $90,000 to $242,000 and from year 3 and beyond,
$90,000 to $315,000.
|
Property, Plant and Equipment
Capital expenditures totaled $20,569,000 in 2017 ($13,193,000 in 2016). Capital spending in 2017
was as follows; $7,500,000 for the
construction of a new pad double rig, $7,574,000 for certifications and overhauls,
$2,671,000 for drill pipe and drill
collars, $2,551,000 for rig equipment
and upgrades and the balance of capital expenditures was for other
equipment. The costs incurred during 2016 for capital were
$4,723,000 for certifications and
overhauls, $1,776,000 for drill pipe
and drill collars, $3,206,000 for rig
equipment and upgrades and $3,361,000
in loans and payables assumed by the Company upon the acquisition
of three joint venture partners' percentage ownership of two joint
venture rigs. The balance of capital expenditures was for other
equipment.
During 2017, the Company sold ancillary assets for $221,000 (2016 - $202,000) that resulted in a gain of $194,000 (2016 – gain of $90,000).
Basis of Analysis in this MD&A, Non-GAAP and Additional
GAAP Items
AKITA and its Joint Ventures' revenue per operating day and
AKITA and its Joint Ventures' operating and maintenance expenses
per operating day are not recognized GAAP measures under
IFRS. Management and certain investors may find "per
operating day" measures for AKITA and Joint Ventures' revenue
indicate pricing strength while AKITA and Joint Ventures' operating
and maintenance expenses per operating day demonstrates a degree of
cost control and provides a proxy for specific inflation rates
incurred by the Company. Readers should be cautioned that in
addition to the foregoing, other factors, including the mix of rigs
that are utilized can also influence these results.
Funds flow from operations is considered an additional GAAP item
under IFRS. AKITA's method of determining funds flow from
operations may differ from methods used by other companies and
includes cash flow from operating activities before working capital
changes, equity income from joint ventures, and income tax amounts
paid or recovered during the period. Management and certain
investors may find funds flow from operations to be a useful
measurement to evaluate the Company's operating results at year-end
and within each year, since the seasonal nature of the business
affects the comparability of non-cash working capital changes both
between and within periods.
Forward-looking Statements
From time to time AKITA makes forward-looking statements.
These statements include but are not limited to comments with
respect to AKITA's objectives and strategies, financial condition,
results of operations, the outlook for industry and risk management
discussions.
By their nature, these forward-looking statements involve
numerous assumptions, inherent risks and uncertainties, both
general and specific, and therefore carry the risk that the
predictions and other forward-looking statements will not be
realized. Readers of this MD&A are cautioned not to place
undue reliance on these statements as a number of important factors
could cause actual future results to differ materially from the
plans, objectives, estimates and intentions expressed in such
forward-looking statements.
Forward-looking statements may be influenced by factors such as
the level of exploration and development activity carried on by
AKITA's customers; world crude oil prices and North American
natural gas prices; global liquefied natural gas (LNG) demand;
weather; access to capital markets; and government policies.
We caution that the foregoing list of factors is not exhaustive and
that while relying on forward-looking statements to make decisions
with respect to AKITA, investors and others should carefully
consider the foregoing factors as well as other uncertainties and
events prior to making a decision to invest in AKITA. Except
where required by law, the Company does not undertake to update any
forward-looking statement, whether written or oral, that may be
made from time to time by it or on its behalf.
Selected Financial Information for the Company is as
follows:
AKITA Drilling
Ltd.
|
Consolidated
Statements of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31
|
|
December
31
|
$
Thousands
|
|
2017
|
|
2016
|
Assets
|
|
|
|
|
Current
assets
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
560
|
$
|
14,250
|
|
Accounts
receivable
|
|
27,024
|
|
28,220
|
|
Income taxes
recoverable
|
|
3,076
|
|
2,356
|
|
Prepaid expenses and
other
|
|
89
|
|
74
|
|
|
30,749
|
|
44,900
|
Non-current
assets
|
|
|
|
|
|
Restricted
cash
|
|
1,525
|
|
2,969
|
|
Other long-term
assets
|
|
528
|
|
894
|
|
Investments in joint
ventures
|
|
4,096
|
|
3,252
|
|
Property, plant and
equipment
|
|
170,599
|
|
205,892
|
Total
Assets
|
$
|
207,497
|
$
|
257,907
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
13,696
|
$
|
8,468
|
|
Dividends
payable
|
|
1,525
|
|
1,525
|
|
|
15,221
|
|
9,993
|
Non-current
liabilities
|
|
|
|
|
|
Financial
instruments
|
|
9
|
|
41
|
|
Deferred income
taxes
|
|
12,592
|
|
23,702
|
|
Deferred share
units
|
|
388
|
|
222
|
|
Pension
liability
|
|
4,832
|
|
4,303
|
Total
liabilities
|
|
33,042
|
|
38,261
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
Class A and Class B
shares
|
|
23,871
|
|
23,871
|
|
Contributed
surplus
|
|
4,500
|
|
4,285
|
|
Accumulated other
comprehensive loss
|
|
(495)
|
|
(366)
|
|
Retained
earnings
|
|
146,579
|
|
191,856
|
Total
equity
|
|
174,455
|
|
219,646
|
Total Liabilities
and Equity
|
$
|
207,497
|
$
|
257,907
|
AKITA Drilling
Ltd.
|
Consolidated
Statements of Net Income (Loss) and Comprehensive Income (Loss)
|
|
|
|
Year Ended December
31
|
$ Thousands except
per share amounts
|
|
2017
|
|
2016
|
|
|
|
|
|
Revenue
|
$
|
71,198
|
$
|
61,061
|
|
|
|
|
|
Costs and
Expenses
|
|
|
|
|
|
Operating and
maintenance
|
|
62,156
|
|
24,169
|
|
Depreciation and
amortization
|
|
27,126
|
|
23,959
|
|
Asset write-down and
impairment loss
|
|
29,123
|
|
-
|
|
Selling and
administrative
|
|
13,659
|
|
12,502
|
Total costs and
expenses
|
|
132,064
|
|
60,630
|
|
|
|
|
|
Revenue less costs
and expenses
|
|
(60,866)
|
|
431
|
|
|
|
|
|
Equity Income from
Joint Ventures
|
|
6,939
|
|
6,064
|
|
|
|
|
|
Other Income
(Loss)
|
|
|
|
|
|
Interest
income
|
|
439
|
|
965
|
|
Interest
expense
|
|
(168)
|
|
(163)
|
|
Gain on sale of
assets
|
|
194
|
|
90
|
|
Net other
gains
|
|
232
|
|
148
|
Total other
income
|
|
697
|
|
1,040
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
(53,230)
|
|
7,535
|
|
|
|
|
|
Income tax expense
(recovery)
|
|
(14,053)
|
|
2,206
|
|
|
|
|
|
Net Income (Loss)
for the Year Attributable to Shareholders
|
|
(39,177)
|
|
5,329
|
|
|
|
|
|
Other
comprehensive loss
|
|
(129)
|
|
(122)
|
|
|
|
|
|
Comprehensive
Income (Loss) for the Year Attributable to
Shareholders
|
$
|
(39,306)
|
$
|
5,207
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss)
per Class A and Class B Share
|
|
|
|
|
Basic
|
$
|
(2.18)
|
$
|
0.30
|
Diluted
|
$
|
(2.18)
|
$
|
0.30
|
AKITA Drilling
Ltd.
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December
31
|
$
Thousands
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(39,177)
|
$
|
5,329
|
Non-cash items
included in net income:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
27,126
|
|
23,959
|
|
Asset decomissioning
and impairment loss
|
|
|
29,123
|
|
-
|
|
Deferred income tax
expense (recovery)
|
|
|
(11,063)
|
|
4,543
|
|
Defined benefit
pension plan expense
|
|
|
443
|
|
432
|
|
Stock options and
deferred share units expense
|
|
|
381
|
|
402
|
|
Gain on sale of
assets
|
|
|
(194)
|
|
(90)
|
|
Unrealized gain on
financial guarantee contracts
|
|
|
(32)
|
|
(75)
|
Funds flow from
operations
|
|
|
6,607
|
|
34,500
|
Change in non-cash
working capital
|
|
|
6,269
|
|
(17,405)
|
Equity income from
joint ventures
|
|
|
(6,939)
|
|
(6,064)
|
Post-employment
benefits
|
|
|
(142)
|
|
(60)
|
Interest
paid
|
|
|
(1)
|
|
(2)
|
Curent income tax
recovery
|
|
|
(2,990)
|
|
(2,337)
|
Income tax
recovered
|
|
|
2,270
|
|
3,260
|
Net cash from
operating activities
|
|
|
5,074
|
|
11,892
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
Capital
expenditures
|
|
|
(20,569)
|
|
(13,193)
|
Change in non-cash
working capital
|
|
|
190
|
|
2,418
|
Distributions from
investments in joint ventures
|
|
|
6,095
|
|
6,753
|
Change in cash
restricted for loan guarantees
|
|
|
1,444
|
|
3,009
|
Proceeds on sale of
assets
|
|
|
221
|
|
202
|
Net cash used in
investing activities
|
|
|
(12,619)
|
|
(811)
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
Dividends
paid
|
|
|
(6,100)
|
|
(6,100)
|
Loan commitment fee
paid
|
|
|
(45)
|
|
(100)
|
Net cash used in
financing activities
|
|
|
(6,145)
|
|
(6,200)
|
|
|
|
|
|
|
Increase in cash
and cash equivalents
|
|
|
(13,690)
|
|
4,881
|
Cash and cash
equivalents, beginning of year
|
|
|
14,250
|
|
9,369
|
|
|
|
|
|
|
Cash and Cash
Equivalents, End of Year
|
|
$
|
560
|
$
|
14,250
|
SOURCE AKITA Drilling Ltd.