CALGARY, AB, March 5, 2021 /CNW/ -
2020 HIGHLIGHTS
- Revenue for 2020 was $936.8
million, a 41 percent decrease from 2019 revenue of
$1,591.3 million.
- Revenue amounts and percentage of total by geographic
area:
-
- Canada - $176.9 million, 19 percent;
- United States - $531.0 million, 57 percent; and
- International - $228.9 million,
24 percent.
- Canadian drilling recorded 5,599 operating days in 2020, a 37
percent decrease from 8,949 operating days in 2019. Canadian well
servicing recorded 28,338 operating hours in 2020, a 39 percent
decrease from 46,718 operating hours in 2019.
- United States drilling
recorded 10,899 operating days in 2020, a 56 percent decrease from
24,802 operating days in 2019. United
States well servicing recorded 99,016 operating hours in
2020, a 14 percent decrease from the 115,136 operating hours in
2019.
- International drilling recorded 3,829 operating days in 2020, a
29 percent decrease from 5,360 operating days recorded in
2019.
- Adjusted EBITDA for 2020 was $241.5
million a 41 percent decrease from Adjusted EBITDA of
$412.5 million for 2019.
- Funds flow from operations for 2020 decreased 44 percent to
$210.3 million from $372.2 million in the year prior.
- • During the third quarter of 2020, the Company completed the
acquisition of Halliburton's 40 percent ownership interest of the
Trinidad Drilling International joint venture. The 40 percent
ownership interest, inclusive of working capital of $20.2 million in the former joint venture, was
purchased with cash on hand for US $33.4
million. With this acquisition, the Company now owns 100
percent of the former joint venture.
- During the 2020 year, the Company received a $12.5 million Canada Emergency Wage Subsidy payment from the
Government of Canada and a
$6.9 million wage subsidy from the
Government of Australia. The wage
subsidies received partially offset the decrease in Adjusted EBITDA
and net loss attributable to common shareholders.
- During the year of 2020, the Company recognized $27.4 million of idle but contracted rig revenue
and $31.1 million of contract
cancellation or early termination fees. As the Company moves into
2021 the amount of such fees and idle but contracted revenue is
expected to reduce year-over-year.
- Net capital expenditures for the calendar year 2020 totaled
$18.4 million, consisting of
$50.2 million in maintenance and
growth capital, offset by proceeds of $31.8
million from disposals. Capital expenditures for the
calendar year 2021 are targeted to be approximately $50.0 million.
- General and administrative expense decreased 21 percent to
$43.6 million for year-ended 2020
from $55.1 million for year-ended
2019. Included in the 2020 general and administrative expense was
$3.4 million in accounts receivable
write-offs relating to 10 unique customers.
- Over the 2020 year, the Company repurchased US $198.7 million face value of unsecured Senior
Notes, in the open market, for cancellation and recorded a gain on
repurchase of $162.8 million (US
$120.9 million).
- Year-over-year total debt for 2020 decreased by $196.9 million to $1,384.6 million as of December 31, 2020 from $1,581.5 as of December
31, 2019.
- On December 31, 2020, the Company
amended and extended the existing $900.0
million revolving credit facility agreement with its
syndicate of lenders. The amendments and one-year extension provide
the Company continued access to revolver capacity and near-term
flexibility in a fluid oil price environment.
- The Company's available liquidity consisting of cash and
available borrowings under its revolving credit facility was
$136.5 million at December 31, 2020.
- During the second quarter of 2020 the Company suspended its
quarterly dividend. The Company declared total dividends of
$0.06 per common share in 2020.
OVERVIEW
Revenue for the year ended December 31,
2020 was $936.8 million, a
decrease of 41 percent from 2019 revenue of $1,591.3 million. Adjusted EBITDA for 2020
totaled $241.5 million, ($1.49 per common share), 41 percent lower than
Adjusted EBITDA of $412.5 million
($2.58 per common share) for the year
ended 2019.
Net loss attributed to common shareholders for the year ended
December 31, 2020 was $79.3 million ($0.49 per common share) compared to net loss
attributed to common shareholders of $162.9
million ($1.02 per common
share) for the year ended December 31,
2019.
During the third quarter of 2020, the Company completed the
acquisition of Halliburton's 40 percent ownership interest in the
Trinidad Drilling International ("TDI") joint venture. The 40
percent ownership interest, inclusive of working capital of
$20.2 million in the TDI joint
venture, was purchased by the Company with cash on hand for US
$33.4 million. With this acquisition,
the Company now owns 100 percent of TDI.
Results for the year ended December 31,
2020 were modestly impacted by the TDI joint venture
acquisition, notably through increased activity levels due to the
increase in rig fleet size, an expanded customer base and enhanced
international exposure.
During 2020, the Company received a $12.5
million Canada Emergency
Wage Subsidy ("CEWS") from the Government of
Canada and a $6.9 million wage subsidy from the Government of
Australia. The wage subsidies
received partially offset the decrease in Adjusted EBITDA and net
loss attributable to common shareholders.
On March 11, 2020, the World
Health Organization ("WHO") declared the novel coronavirus
("COVID-19") a global pandemic due to the sustained risk of
worldwide spread of the virus. Governments and health authorities
around the world implemented a wide variety of measures to combat
the spread of the virus, including travel restrictions, business
closures, social distancing, public gathering restrictions,
stay-at-home orders and event cancellations. The impact of these
measures led to a significant slow-down in global economic activity
that subsequently reduced the demand for crude oil and natural gas.
The significant reduction in demand contributed to the steep and
rapid decline in global crude oil and natural gas prices seen
earlier in 2020. Furthermore, the demand decline further challenged
commodity prices already reeling from a market share and oil price
war between certain crude oil producing nations. The full magnitude
and duration of the impact of these events on global economies and
the oil and natural gas industry remains uncertain.
During the second half of 2020, stay-at-home related
restrictions generally were eased globally, increasing the demand
for crude oil and natural gas. OPEC+ nations curtailed crude oil
supply in addition to producer led production curtailments which
resulted in improved supply and demand fundamentals. Improved
fundamentals resulted in relatively stabilized crude oil commodity
prices over the second half of 2020. As a result, drilling and
completions activity stabilized and improved modestly.
Over the short term, there is a high degree of uncertainty
regarding the macroeconomic conditions that will impact our
business that include the pathway of the COVID-19 pandemic,
COVID-19 mitigation strategies, such as stay-at-home orders and
lockdown related restrictions, vaccination distribution and
efficacy, the degree and impact of COVID-19 mitigation strategies
and other factors on the demand for crude oil and natural gas,
commodity prices and the demand for oilfield services.
Early in March 2020, in response
to the COVID-19 pandemic, the Company implemented rigorous measures
across its global operations to ensure the safety of its
operations, the health of its employees and the continuity of its
business. These measures include, but are not limited to, remote
work where possible, fitness for work screening for employees,
contractors and any third parties on site, restricted travel
policies and aggressive hygiene practices and disinfecting
protocols in accordance with WHO and local jurisdiction
guidelines.
Across the Company's global operations, these proactive measures
have facilitated the safe continuity and reliability of its
operations in the field and an orderly transition to remote work
for our office employees. Furthermore, the Company has implemented
regional Emergency Response Groups to respond to any incidents.
These measures continue to be in place, and will be adapted as
needed, as the Company continues to monitor local government
recommendations and public health guidelines, prioritizing the
health and safety of its workforce.
Working capital as of December 31,
2020 was a surplus of $98.6
million, compared to a working capital surplus of
$127.0 million as of December 31, 2019. The decrease in working
capital year-over-year was largely due to the repurchases of some
of the unsecured Senior Notes (the "Senior Notes") throughout the
year, net capital purchases and the acquisition of Haliburton's TDI joint venture interest. The
Company's available liquidity consisting of cash and available
borrowings under its $900.0 million
revolving credit facility (the "Credit Facility") totaled
$136.5 million as of December 31, 2020, compared to $178.4 million at December
31, 2019. The available liquidity decreased by $41.9 million due to a higher withdrawal to
finance the repurchase of Senior Notes and acquire Haliburton's 40 percent interest of TDI joint
venture in 2020 compared to 2019.
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 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
share data and operating information)
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Revenue
1
|
201,265
|
|
375,410
|
|
(46)
|
|
936,818
|
|
1,591,338
|
|
(41)
|
Adjusted EBITDA
1, 2
|
52,742
|
|
95,404
|
|
(45)
|
|
241,525
|
|
412,468
|
|
(41)
|
Adjusted EBITDA per
common share 1, 2
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.33
|
|
$
|
0.58
|
|
(43)
|
|
$
|
1.49
|
|
$
|
2.58
|
|
(42)
|
Diluted
|
$
|
0.33
|
|
$
|
0.58
|
|
(43)
|
|
$
|
1.49
|
|
$
|
2.58
|
|
(42)
|
Net income (loss)
attributable to common shareholders
|
3,092
|
|
(71,615)
|
|
nm
|
|
(79,329)
|
|
(162,905)
|
|
(51)
|
Net income (loss)
income per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.02
|
|
$
|
(0.44)
|
|
nm
|
|
$
|
(0.49)
|
|
$
|
(1.02)
|
|
(52)
|
Diluted
|
$
|
0.02
|
|
$
|
(0.44)
|
|
nm
|
|
$
|
(0.49)
|
|
$
|
(1.02)
|
|
(52)
|
Cash provided by
operating activities 1
|
17,393
|
|
127,796
|
|
(86)
|
|
246,974
|
|
404,816
|
|
(39)
|
Funds flow from
operations 1
|
69,630
|
|
89,512
|
|
(22)
|
|
210,265
|
|
372,234
|
|
(44)
|
Funds flow from
operations per common share 1
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.44
|
|
$
|
0.54
|
|
(19)
|
|
$
|
1.30
|
|
$
|
2.33
|
|
(44)
|
Diluted
|
$
|
0.44
|
|
$
|
0.54
|
|
(19)
|
|
$
|
1.30
|
|
$
|
2.33
|
|
(44)
|
Total debt
|
1,384,605
|
|
1,581,529
|
|
(12)
|
|
1,384,605
|
|
1,581,529
|
|
(12)
|
Weighted average
common shares - basic
(000s)
|
162,629
|
|
165,547
|
|
(2)
|
|
161,667
|
|
159,599
|
|
1
|
Weighted average
common shares - diluted
(000s)
|
162,721
|
|
165,593
|
|
(2)
|
|
161,927
|
|
159,686
|
|
1
|
Drilling
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Number of marketed
rigs 3
|
|
|
|
|
|
|
|
|
|
|
|
Canada
4
|
101
|
|
101
|
|
—
|
|
101
|
|
101
|
|
—
|
United
States
|
122
|
|
122
|
|
—
|
|
122
|
|
122
|
|
—
|
International
5
|
48
|
|
43
|
|
12
|
|
48
|
|
43
|
|
12
|
Total
|
271
|
|
266
|
|
2
|
|
271
|
|
266
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days
6
|
|
|
|
|
|
|
|
|
|
|
|
Canada
4
|
1,434
|
|
2,217
|
|
(35)
|
|
5,599
|
|
8,949
|
|
(37)
|
United
States
|
2,108
|
|
5,313
|
|
(60)
|
|
10,899
|
|
24,802
|
|
(56)
|
International
5
|
907
|
|
1,432
|
|
(37)
|
|
3,829
|
|
5,360
|
|
(29)
|
Total
|
4,449
|
|
8,962
|
|
(50)
|
|
20,327
|
|
39,111
|
|
(48)
|
|
|
|
|
|
|
|
|
|
|
|
|
Well
Servicing
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Number of
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
52
|
|
52
|
|
—
|
|
52
|
|
52
|
|
—
|
United
States
|
47
|
|
47
|
|
—
|
|
47
|
|
47
|
|
—
|
Total
|
99
|
|
99
|
|
—
|
|
99
|
|
99
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
6,955
|
|
11,646
|
|
(40)
|
|
28,338
|
|
46,718
|
|
(39)
|
United
States
|
26,764
|
|
28,395
|
|
(6)
|
|
99,016
|
|
115,136
|
|
(14)
|
Total
|
33,719
|
|
40,041
|
|
(16)
|
|
127,354
|
|
161,854
|
|
(21)
|
nm - calculation
not meaningful
|
1.
|
Comparative
revenue, Adjusted EBITDA, Adjusted EBITDA per common share, cash
provided by operating activities, funds flow from
operations and funds flow from operations per common share
have been revised to conform with current year's
presentation.
|
2.
|
Refer to Adjusted
EBITDA calculation in Non-GAAP Measures.
|
3.
|
Total rigs: Canada
- 118, United States - 136, International - 53 (2019: Canada - 118,
United States - 138, International - 48).
|
4.
|
Excludes coring
rigs.
|
5.
|
Includes workover
rigs and former TDI joint venture drilling rigs, effective July 16,
2020.
|
6.
|
Defined as
contract drilling days, between spud to rig release.
|
FINANCIAL POSITION AND CAPITAL EXPENDITURES
HIGHLIGHTS
As at ($
thousands)
|
2020
|
|
2019
|
|
2018
|
Working capital
1
|
98,612
|
|
126,987
|
|
(156,233)
|
Cash
|
44,198
|
|
28,408
|
|
84,823
|
Long-term
debt
|
1,384,605
|
|
1,581,529
|
|
1,340,352
|
Long-term debt, net
of cash
|
1,340,407
|
|
1,553,121
|
|
1,255,529
|
Total long-term
financial liabilities
|
1,390,647
|
|
1,591,047
|
|
1,350,041
|
Total
assets
|
3,054,493
|
|
3,470,601
|
|
3,993,162
|
Long-term debt to
long term-debt plus shareholder's equity ratio
|
0.50
|
|
0.52
|
|
0.43
|
1 See
Non-GAAP Measures section.
|
|
|
Three months ended
December 31
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
2019
|
% change
|
2020
|
2019
|
% change
|
Capital
expenditures
|
|
|
|
|
|
|
Upgrade/growth
|
—
|
9,433
|
nm
|
10,013
|
95,778
|
(90)
|
Maintenance
|
5,032
|
14,941
|
(66)
|
40,229
|
40,228
|
—
|
Proceeds
from disposals or property and equipment
|
(8,371)
|
(7,082)
|
18
|
(31,829)
|
(39,997)
|
(20)
|
Net capital
(proceeds) expenditures
|
(3,339)
|
17,292
|
nm
|
18,413
|
96,009
|
(81)
|
nm - calculation not
meaningful
|
REVENUE AND OILFIELD SERVICES EXPENSE
|
Three months ended
December 31
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
2019
|
% change
|
2020
|
2019
|
% change
|
Revenue
1
|
|
|
|
|
|
|
Canada
|
40,885
|
71,155
|
(43)
|
176,872
|
293,333
|
(40)
|
United States
1
|
104,629
|
217,400
|
(52)
|
531,030
|
1,004,627
|
(47)
|
International
|
55,751
|
86,855
|
(36)
|
228,916
|
293,378
|
(22)
|
Total
revenue
|
201,265
|
375,410
|
(46)
|
936,818
|
1,591,338
|
(41)
|
|
|
|
|
|
|
Oilfield services
expense 1
|
136,708
|
266,460
|
(49)
|
658,201
|
1,134,328
|
(42)
|
1.
|
Comparative revenue
and oilfield services expense have been revised to conform with
current year's presentation.
|
Revenue for the year ended December 31,
2020 totaled $936.8 million, a
41 percent decrease from the year ended December 31, 2019 of
$1,591.3 million. The decrease in
total revenue during the year ended December
31, 2020 was due to the oil price and market share war
between certain crude oil producing nations followed by the
significant and adverse impact of the COVID-19 pandemic on the oil
and natural gas industry. The fallout from the pandemic led to a
significant drop in demand for crude oil and natural gas, which
further challenged an already over-supplied commodity market. The
steep declines in demand and continued oversupply have resulted in
a significant activity slowdown for oilfield services. The
financial results from the Company's United States and international operations
were positively impacted on the currency translation, as
the United States dollar
strengthened relative to the Canadian dollar for year ended
December 31, 2019. The Company
recorded revenue of $201.3 million for the three months
ended December 31, 2020, a 46 percent decrease from
the $375.4 million recorded in the three months
ended December 31, 2019.
CANADIAN OILFIELD SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2020
|
2019
|
% change
|
|
2020
|
2019
|
% change
|
Marketed drilling
rigs1,2
|
|
|
|
|
|
|
|
Opening
balance
|
101
|
118
|
|
|
101
|
125
|
|
Transfers,
net
|
—
|
—
|
|
|
—
|
(1)
|
|
Placed into
reserve
|
—
|
—
|
|
|
—
|
(5)
|
|
Decommissions
|
—
|
(17)
|
|
|
—
|
(18)
|
|
Ending
balance
|
101
|
101
|
—
|
|
101
|
101
|
—
|
Drilling operating
days3
|
1,434
|
2,217
|
(35)
|
|
5,599
|
8,949
|
(37)
|
Drilling rig
utilization (%)1
|
13.2
|
17.9
|
(26)
|
|
13.0
|
18.2
|
(29)
|
Well servicing
rigs
|
|
|
|
|
|
|
|
Opening
balance
|
52
|
55
|
|
|
52
|
62
|
|
Decommissions
|
—
|
(3)
|
|
|
—
|
(10)
|
|
Ending
balance
|
52
|
52
|
—
|
|
52
|
52
|
—
|
Well servicing
operating hours
|
6,955
|
11,646
|
(40)
|
|
28,338
|
46,718
|
(39)
|
Well servicing
utilization (%)
|
14.5
|
23.0
|
(37)
|
|
14.9
|
23.3
|
(36)
|
1 Excludes
coring rig fleet.
|
2 Total
rigs: Canada - 118, (2019 - Canada - 118).
|
3 Defined
as contract drilling days, between spud to rig
release.
|
The Company recorded revenue of $176.9
million in Canada for the
year ended December 31, 2020, a decrease of 40 percent from
$293.3 million recorded for the year
ended December 31, 2019. During the year-ended December 31, 2020, the Company recognized
$3.6 million of idle but contracted
rig revenue (2019 - $9.5 million).
Revenue generated in Canada decreased by 43 percent
to $40.9 million for the three months ended December
31, 2020, from $71.2 million for the three months
ended December 31, 2019. During three months ended
December 31, 2020, the Company
recognized $2.0 million of idle but
contracted rig revenue (2019 - $2.5
million). For the year ended December 31, 2020,
total revenues generated from the Company's Canadian operations
were 19 percent of the Company's total revenue compared with 18
percent in the prior year. In the fourth quarter of 2020, Canadian
revenues accounted for 20 percent of the total revenue compared
with 19 percent in 2019.
For the year ended December 31, 2020, the Company recorded
5,599 drilling operating days in Canada, a decrease of 37 percent as compared
to 8,949 drilling operating days for the year ended
December 31, 2019. During the fourth quarter of 2020 the
Company recorded 1,434 operating days in Canada, a decrease of 35 percent from 2,217
operating days recorded during the fourth quarter of the prior
year. Well servicing hours decreased by 39 percent to 28,338
operating hours compared with 46,718 operating hours for the year
ended December 31, 2019. Well servicing hours in the fourth
quarter of 2020 were down 40 percent to 6,955 compared to the
11,646 hours in the fourth quarter of the prior year.
The operating and financial results for the Company's Canadian
operations were significantly and negatively impacted during the
2020 year due to the macroeconomic and industry conditions seen
since March of 2020 including but not limited to, the impact of the
COVID-19 pandemic and subsequent lockdown related restrictions,
resulting in decreased demand for crude oil and increased market
supply.
UNITED STATES OILFIELD
SERVICES
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Marketed drilling
rigs1
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
122
|
|
134
|
|
|
|
122
|
|
133
|
|
|
Transfers,
net
|
—
|
|
—
|
|
|
|
—
|
|
1
|
|
|
Decommissions
|
—
|
|
(12)
|
|
|
|
—
|
|
(12)
|
|
|
Ending
balance
|
122
|
|
122
|
|
—
|
|
122
|
|
122
|
|
—
|
Drilling operating
days2
|
2,108
|
|
5,313
|
|
(60)
|
|
10,899
|
|
24,802
|
|
(56)
|
Drilling rig
utilization (%)
|
16.6
|
|
37.9
|
|
(56)
|
|
21.6
|
|
44.7
|
|
(52)
|
Well servicing
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
47
|
|
47
|
|
|
|
47
|
|
46
|
|
|
Additions
|
—
|
|
—
|
|
|
|
—
|
|
1
|
|
|
Ending
balance
|
47
|
|
47
|
|
—
|
|
47
|
|
47
|
|
—
|
Well servicing
operating hours
|
26,764
|
|
28,395
|
|
(6)
|
|
99,016
|
|
115,136
|
|
(14)
|
Well servicing
utilization (%)
|
61.9
|
|
65.7
|
|
(6)
|
|
57.6
|
|
67.5
|
|
(15)
|
1 Total
rigs: United States - 136, (2019 - United States - 138).
|
2 Defined
as contract drilling days, between spud to rig
release.
|
For the year ended December 31, 2020, revenue of
$531.0 million was recorded in
the United States, a decrease of
47 percent from the $1,004.6 million
recorded in the prior year. Revenues recorded in the United States were $104.6 million in the fourth quarter of 2020, a
52 percent decrease from the $217.4
million recorded in the corresponding period of the prior
year. The Company's United States
operations accounted for 57 percent of the Company's total revenue
in the 2020 fiscal year (2019 - 64 percent) and were the largest
contributor to the Company's total revenues in 2020, consistent
with the prior year. In the United
States, the Company recognized US $10.0 million of idle but contracted revenue and
US $23.2 million of contract early
termination or cancellation fees in 2020 (2019 - US $9.9 million). During the fourth quarter of
2020, United States operations
accounted for 52 percent of the Company's revenue (2019 - 58
percent), also the largest contributor to the Company's
consolidated fourth quarter revenues and consistent with the prior
year. During the fourth quarter the Company recognized US
$1.9 million of idle but contracted
revenue and US $4.7 million of
contract early termination or cancellation fees (2019 - US
$7.2 million).
In the United States, drilling
operating days decreased by 56 percent from 24,802 drilling
operating days in 2019 to 10,899 operating days in 2020. For the
year ended December 31, 2020, well servicing activity
decreased 14 percent to 99,016 operating hours, from 115,136
operating hours in 2019. During the fourth quarter drilling
operating days decreased by 60 percent from 5,313 operating days in
2019 to 2,108 operating days in 2020. For the fourth quarter ended
December 31, 2020, well servicing activity decreased six
percent from 28,395 operating hours in 2019 to 26,764 operating
hours.
The operating and financial results for the Company's
United States operations were also
significantly and negatively impacted during the year ended
December 31, 2020 due to the
macroeconomic and industry conditions seen this year. The
strengthening United States dollar
year over year versus the Canadian dollar partially offset the
declines in operating activity when compared to the same period of
2019.
During the fourth quarter of 2020, the Company decommissioned
two drilling rigs in the United
States from its non-marketed fleet.
INTERNATIONAL OILFIELD SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2020
|
2019
|
% change
|
|
2020
|
2019
|
% change
|
Marketed drilling and
workover rigs1
|
|
|
|
|
|
|
|
Opening
balance
|
48
|
43
|
|
|
43
|
44
|
|
Acquisition of TDI
joint venture
|
—
|
—
|
|
|
5
|
—
|
|
Additions
|
—
|
—
|
|
|
—
|
1
|
|
Placed into
reserve
|
—
|
—
|
|
|
—
|
(2)
|
|
Ending
balance
|
48
|
43
|
12
|
|
48
|
43
|
12
|
Drilling operating
days2
|
907
|
1,432
|
(37)
|
|
3,829
|
5,360
|
(29)
|
Drilling rig
utilization (%)
|
19.3
|
32.4
|
(40)
|
|
21.2
|
31.1
|
(32)
|
|
1 Total
rigs: International - 53, (2019 - 48).
|
2 Defined as contract drilling days,
between spud to rig release.
|
The Company's international revenues for the year ended
December 31, 2020 decreased 22 percent to $228.9 million from $293.4
million recorded in the year ended December 31, 2019.
International revenue totaled $55.8
million in the fourth quarter of 2020, a 36 percent decrease
from $86.9 million recorded in the
corresponding period of the prior year. The Company's international
operations accounted for 24 percent of the Company's total revenue
in 2020 (2019 - 18 percent). The Company's international operations
recognized US $7.8 million of idle
but contracted revenue in 2020 (2019 - $ nil). The Company's
international operations contributed 28 percent of the Company's
fourth quarter revenue in 2020 (2019 - 23 percent). During the
fourth quarter the Company recognized US $0.3 million of idle but contracted revenue (2019
- $ nil).
International drilling operating days totaled 3,829 in 2020
compared to 5,360 drilling operating days for the year ended
December 31, 2019, a decrease of 29 percent compared to the
year prior. International operating days for the three months ended
December 31, 2020 decreased 37 percent to 907 compared to
1,432 operating days in the fourth quarter of 2019.
Similar to our North American operations, international
operating and financial results were also negatively impacted by
industry conditions seen this year. The acquisition of TDI joint
venture during the third quarter of 2020 and the strengthening
United States dollar year over
year versus the Canadian dollar partially offset the declines in
operating activity when compared to the similar period of 2019.
JOINT VENTURE
During the third quarter of 2020, the Company completed the
acquisition of Halliburton's 40 percent ownership interest in the
TDI joint venture. The 40 percent ownership interest, inclusive of
working capital of $20.2 million in
TDI joint venture, was purchased with the Company's cash on hand
for US $33.4 million. With this
acquisition, the Company has owned 100 percent of TDI since
July 16, 2020. The acquisition was
accounted for as a business combination using the acquisition
method whereby the net assets and liabilities assumed are recorded
at fair value.
The preliminary purchase price allocation is based on
management's best estimates of the fair value of TDI's assets and
liabilities as at the Effective Acquisition Date of July 16, 2020, although future adjustments to
estimates may be required. If new information is obtained within
one year from the acquisition date about facts and circumstances
that existed as at the Effective Acquisition Date and which
reasonably requires adjustments to above amounts, or any additions
to provisions that existed at the Effective Acquisition Date, then
the accounting at acquisition will be revised.
Amounts below are presented at 100 percent of the value included
in the statement of operations and comprehensive (loss) income for
the former TDI joint venture up to the date of acquisition by the
Company. Prior to July 16, 2020, the
Company owned 60 percent of the shares of the former TDI joint
venture and each of the parties had equal voting rights. The former
joint venture had been considered to be a financial asset and fair
valued through the consolidated statement of (loss) income.
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Revenue ($
thousands)
|
—
|
|
19,741
|
|
nm
|
|
38,514
|
|
60,714
|
|
(37)
|
Drilling operating
days
|
—
|
|
212
|
|
nm
|
|
535
|
|
633
|
|
(15)
|
Drilling rig
utilization (%)
|
—
|
|
46.1
|
|
nm
|
|
54.0
|
|
34.0
|
|
59
|
nm - calculation not
meaningful
|
For the year ended December 31,
2020, up to the date of the acquisition of July 16, 2020, TDI recorded operating revenue of
$38.5 million (2019 - $60.7 million) and operating days totaled
535 (2019 - 633).
The decrease in financial and operational results year-over-year
is due to the acquisition of the remaining 40 percent interest in
TDI joint venture, effective July 16,
2020, is consolidated within the financial and operating
results of the Company.
DEPRECIATION
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Depreciation
|
96,338
|
|
93,537
|
|
3
|
|
374,705
|
|
363,144
|
|
3
|
Depreciation expense for the year increased by three percent to
$374.7 million compared with
$363.1 million for the year ended
2019. Depreciation expense totaled $96.3
million for the fourth quarter of 2020 compared with
$93.5 million for the fourth quarter
of 2019, an increase of three percent. The increase to depreciation
expense was the result of depreciating newly acquired property and
equipment and a higher foreign exchange rate on United States denominated property and
equipment values.
IMPAIRMENT
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Impairment
|
11,480
|
|
—
|
|
nm
|
|
11,480
|
|
—
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - calculation not
meaningful
|
The Company reviewed the carrying value of its property and
equipment for indications of impairment at the end of each
reporting period. At March 31, 2020,
the Company tested all its cash-generating units ("CGUs") for
impairment and no impairment was identified. As at December 31, 2020, the Company reviewed each CGU
and identified indications of impairment within the Latin America
CGU. As a result of the review, the Company recorded an impairment
of $11.5 million within its Latin
American CGU.
GENERAL AND ADMINISTRATIVE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
General and
administrative
|
11,815
|
|
13,462
|
|
(12)
|
|
43,567
|
|
55,064
|
|
(21)
|
% of
revenue
|
5.9
|
|
3.6
|
|
|
|
4.7
|
|
3.5
|
|
|
For the year ended December 31, 2020, general and
administrative expense totaled $43.6
million (4.7 percent of revenue) compared to $55.1 million (3.5 percent of revenue) for the
year ended December 31, 2019, a
decrease of 21 percent. General and administrative expense
decreased 12 percent to $11.8 million
(5.9 percent of revenue) for the fourth quarter of 2020. General
and administrative expenses decreased as a result of cost saving
initiatives, the wage subsidy received from the Government of
Canada, reductions in personnel
and organizational restructuring. The decrease was partially offset
by $3.4 million in accounts
receivable write-offs recorded during year ended December 31, 2020 (2019 -$
0.1 million).
In light of the then-current operating environment, effective
April 1, 2020, the Company took steps
to reduce overhead costs by reducing the salaries and number of
employees. The Company's named executive officers' salaries were
reduced by 40 percent for the Chairman, 20 percent for the
President and Chief Operating Officer and 12.5 percent for the
other named executive officers. In addition, the annual base cash
and equity retainers for independent members of the Board of
Directors were reduced, also effective April 1, 2020, by 20
and 40 percent respectively. Such reductions reflect the
Company's belief in the importance of continued cost control
in light of the then-current oilfield services industry outlook and
remained in place as the Company entered 2021. The Company has and
will continue to consider additional means of reducing overhead and
operating costs.
RESTRUCTURING
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Restructuring
|
4,448
|
|
1,555
|
|
nm
|
|
16,042
|
|
12,644
|
|
27
|
nm - calculation not
meaningful
|
For the year ended December 31,
2020, restructuring expense totaled $16.0 million (2019 - $12.6 million). Restructuring expense consists of
costs relating to the organizational restructuring of the Company
due to the significant decline in activity. For the fourth quarter
of 2020, restructuring costs were $4.4
million (2019 - $1.6
million).
FOREIGN EXCHANGE AND OTHER (GAIN) LOSS
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Foreign exchange and
other (gain) loss
|
(8,788)
|
|
4,673
|
|
nm
|
|
(5,726)
|
|
25,426
|
|
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.
LOSS (GAIN) ON ASSET SALE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Loss (gain) on asset
sale
|
—
|
|
—
|
|
nm
|
|
3,437
|
|
(9,824)
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - calculation not
meaningful
|
During the second quarter of 2020, the Company finalized the
sale of the land and building that was classified on its balance
sheet as an asset held for sale. The net proceeds received were
$15.4 million, resulting in a loss of
$3.4 million (2019 - gain of
$9.8 million) before taxes.
GAIN ON REPURCHASE OF UNSECURED SENIOR NOTES
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Gain on repurchase of
unsecured
Senior Notes
|
(59,260)
|
|
(3,077)
|
|
nm
|
|
(162,849)
|
|
(4,647)
|
|
nm
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - calculation not
meaningful
|
For the year ended December 31,
2020, the Company repurchased US $198.7 million (2019 - US $58.0 million) face value of Senior Notes, in the
open market, for cancellation and recorded a gain on repurchase of
$162.8 million (US $120.9 million) (2019 - US $3.5 million).
For the fourth quarter of 2020, the Company likewise repurchased
US $72.8 million (2019 - US
$20.5 million) of face value Senior
Notes and recorded a gain on repurchase of $59.3 million (2019 - $3.1
million).
INTEREST EXPENSE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Interest
expense
|
24,236
|
|
34,717
|
|
(30)
|
|
107,374
|
|
135,245
|
|
(21)
|
Interest expenses were incurred on the Company's Credit
Facility, the United States dollar
denominated Senior Notes, $37.0
million of subordinate convertible debentures (the
"Convertible Debentures") and capital lease
obligations. Included within interest expense for 2020 is
$5.2 million of accrued interest
relating to the Senior Notes, paid in cash as part of the
repurchase of the Senior Notes (2019 - $1.4
million).
Interest expense decreased by $27.9
million for the year ended December
31, 2020 compared to the same period in 2019. The decrease
is the result of a decrease in overall borrowing level. The
negative translation impact on US dollar-denominated debt partially
offset the interest expense decrease for the year ended
December 31, 2020. For the three
months ended December 31, 2020,
interest expense decreased 30 percent to $10.5 million compared to the comparative period
in 2019.
INCOME TAXES (RECOVERY)
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Current income
tax
|
51
|
|
1,965
|
|
(97)
|
|
1,140
|
|
3,416
|
|
(67)
|
Deferred income tax
(recovery)
|
(34,061)
|
|
(9,496)
|
|
nm
|
|
(54,928)
|
|
(22,221)
|
|
nm
|
Total income tax
(recovery)
|
(34,010)
|
|
(7,531)
|
|
nm
|
|
(53,788)
|
|
(18,805)
|
|
nm
|
Effective income tax
rate (%)
|
nm
|
|
9.6
|
|
|
|
44.6
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - calculation not
meaningful
|
The effective income tax rate for the year ended
December 31, 2020 was 44.6 percent compared with
10.6 percent for the year ended December 31, 2019.
The effective tax rate was significantly impacted by a rate change
in the United States and by
increased earnings in foreign jurisdictions.
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL
($ thousands,
except per share amounts)
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
2020
|
|
2019
|
|
% change
|
|
2020
|
|
2019
|
|
% change
|
Cash provided by
operating activities 1
|
17,393
|
|
127,796
|
|
(86)
|
|
246,974
|
|
404,816
|
|
(39)
|
Funds flow from
operations 1
|
69,630
|
|
89,512
|
|
(22)
|
|
210,265
|
|
372,234
|
|
(44)
|
Funds flow from
operations per common share 1
|
$
|
0.44
|
|
$0.54
|
|
(19)
|
|
$
|
1.30
|
|
$
|
2.33
|
|
(44)
|
Working
capital
|
98,612
|
|
126,987
|
|
(22)
|
|
98,612
|
|
126,987
|
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
Comparative cash provided by operating activities, funds flow from
operations and funds flow from operations per common share have
been revised to conform with current year's
presentation.
|
For the year ended December 31,
2020, the Company generated funds flow from operations of
$210.3 million ($1.30 per common share) a decrease of 44 percent
from $372.2 million ($2.33 per common share) for the year ended
December 31, 2019. The Company
generated funds flow from operations of $69.6 million ($0.44 per common share) in the three months ended
December 31, 2020, compared to
$89.5 million ($0.54 per common share) for the three months
ended December 31, 2019. The decrease
in funds flow from operations in 2020 compared to 2019 is due to a
decrease in activity as a result of the oil and natural gas
industry's current business environment.
As of December 31, 2020, the
Company's working capital was a surplus of $98.6 million, compared to a working capital
surplus of $127.0 million as of
December 31, 2019. The decrease in
working capital in 2020 was primarily related to the repurchases of
Senior Notes throughout 2020, net capital purchases and the
acquisition of Haliburton's TDI
joint venture interest. The Company's Credit Facility provides for
total borrowings of $900.0 million of
which $92.3 million was undrawn and
available at December 31,
2020.
INVESTING ACTIVITIES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
2019
|
% change
|
|
2020
|
2019
|
% change
|
Purchase of property
and equipment
|
(5,032)
|
(24,374)
|
(79)
|
|
(50,242)
|
(136,006)
|
(63)
|
Proceeds from
disposals of property and equipment
|
8,371
|
7,082
|
18
|
|
31,829
|
39,997
|
(20)
|
Acquisition of joint
venture and minority interest, net of cash
|
—
|
—
|
—
|
|
(31,885)
|
(49,214)
|
(35)
|
Net change in
non-cash working capital
|
(524)
|
(1,346)
|
(61)
|
|
59
|
3,139
|
(98)
|
Cash provided by
(used in) investing activities
|
2,815
|
(18,638)
|
nm
|
|
(50,239)
|
(142,084)
|
(65)
|
nm - calculation not
meaningful
|
Net purchases of property and equipment during the fiscal year
ending 2020 totaled $18.4 million
(2019 - $96.0 million) and net
proceeds from disposals of property and equipment totaled
$3.3 million for the fourth quarter
(2019 - net purchases of $17.3
million). The purchase of property and equipment relates
predominantly to $40.2 million in
maintenance capital and $10.0 million
in upgrade capital (2019 - $40.2
million and $95.8
respectively).
FINANCING ACTIVITIES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
2019
|
% change
|
|
2020
|
2019
|
% change
|
Proceeds from
long-term debt
|
12,951
|
32,177
|
(60)
|
|
121,520
|
2,266,408
|
(95)
|
Repayments of
long-term debt
|
(15,732)
|
(70,533)
|
(78)
|
|
(164,518)
|
(2,375,891)
|
(93)
|
Lease obligation
principle repayments
|
(1,812)
|
(4,892)
|
(63)
|
|
(9,216)
|
(10,888)
|
(15)
|
Interest
paid
|
(32,452)
|
(44,033)
|
(26)
|
|
(107,956)
|
(140,308)
|
(23)
|
Purchase of common
shares held in trust
|
(244)
|
(502)
|
(51)
|
|
(969)
|
(1,398)
|
(31)
|
Cash
dividends
|
—
|
(11,341)
|
nm
|
|
(19,574)
|
(53,076)
|
(63)
|
Net change in
non-cash working capital
|
—
|
(23,349)
|
nm
|
|
—
|
(2,981)
|
nm
|
Cash used in
financing activities
|
(37,289)
|
(122,473)
|
(70)
|
|
(180,713)
|
(318,134)
|
(43)
|
nm - calculation not
meaningful
|
As at December 31, 2020 the amount
of available borrowings under the Credit Facility was $92.3 million. In addition, the Company has
available a US $50.0 million secured
letter of credit facility, of which US $12.0
million was available as of December
31, 2020. On December 31,
2020, the Company amended and extended the existing
$900.0 million Credit Facility
agreement with its syndicate of lenders. The amendments and
one-year extension provide the Company with continued access to
revolver capacity and near-term flexibility in a volatile oil price
environment.
The maturity date of the Credit Facility is November 25, 2022; provided that if on or before
September 30, 2021, the maturity date
of the Company's Convertible Debentures is not extended from
January 22, 2022, to a date no
earlier than February 26, 2023, then
the maturity date of the Credit Facility shall automatically be
amended to November 29, 2021. No
principal payments are due until then.
During the second quarter of 2019, the Company issued US
$700.0 million of Senior Notes due
2024 bearing interest of 9.25% per annum. The net proceeds of the
Senior Notes offering and cash on hand were used to repay all
outstanding loans under the Company's US $700.0 million senior loan. The Senior Notes may
be redeemed by the Company on or after April
15, 2021 at 104.625%, April 15,
2022 at 102.313% and April 15,
2023 and thereafter at 100%, plus accrued interest. The
current capital structure 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.
The Company may at any time and from time to time acquire
Senior Notes for cancellation by means of open market purchases or
negotiated transactions. With the above mentioned amended Credit
Facility, the Company is limited in the acquisition and
cancellation of the Senior Notes up to $25.0
million. Senior Notes may be repurchased for redemption in
excess of $25.0 million if certain
criteria are met. During the year ended December 31, 2020, the Company purchased US
$198.7 million of face value Senior
Notes for cancellation, in the open market. The Company purchased a
further US $8.6 million of Senior
Notes for cancellation subsequent to December 31, 2020.
Covenants
The following is a list of the Company's currently applicable
covenants pursuant to the Credit Facility and the covenant
calculations as at December 31,
2020:
|
Covenant
|
December 31,
2020
|
The Credit
Facility
|
|
|
Consolidated
EBITDA1
|
≤ $140.0
million
|
$
|
254,957
|
Consolidated EBITDA to
Consolidated Interest Expense1,2
|
≥ 1.75
|
2.52
|
Consolidated Senior
Debt to Consolidated EBITDA1,3
|
≤ 3.50
|
2.99
|
1 Please refer to "Non-GAAP Measures"
and "Overview and Select Annual Information" sections 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 December 31, 2020 the
Company was in compliance with all covenants related to the Credit
Facility.
The Credit Facility
The Credit Facility agreement, a copy of which is available on
SEDAR, including amendments requires that the Company comply with
certain covenants including a minimum Consolidated EBITDA
requirements, a Consolidated EBITDA to Consolidated Interest
Expense ratio and a Consolidated Senior Debt to Consolidated EBITDA
ratio.
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 to the Credit Facility, dated
December 31, 2020, the permitted
encumbrances were reduced from $75.0
million to $25.0 million.
Senior Notes
The indenture governing the Senior Notes, which is 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. These restrictions are tempered by the existence of a
number of exceptions to the general prohibitions, including baskets
allowing for restricted payments.
The indenture also restricts the Company's 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 at December 31, 2020, the Company has not incurred
additional indebtedness that would require the Fixed Charge
Coverage Ratio to be calculated. As is the case with restricted
payments, there are a number of exceptions to this prohibition on
the incurrence of additional indebtedness, including the incurrence
of additional debt under credit facilities up to the greater of
$900.0 million or 22.5 percent of the
Company's consolidated tangible assets and of additional secured
debt subordinated to the credit facilities up to the greater of US
$125.0 million or 4.0 percent of the
Company's consolidated tangible assets.
NEW BUILDS AND MAJOR RETROFITS
Through the Company's acquisition of the 40 percent interest in
the TDI joint venture previously owned by Haliburton, the Company added five drilling
rigs, of which it had a 60 percent ownership interest prior to the
acquisition. The Company is currently directing capital
expenditures primarily to maintenance capital items.
During the fourth quarter of 2020, the Company decommissioned
two drilling rigs in the United
States from its non-marketed fleet.
OUTLOOK
Industry Overview
The outlook for oilfield services has recently and meaningfully
improved as oil and natural gas industry fundamentals continue to
recover. Supported by OPEC+ moderating supply, global oil commodity
prices improved over the fourth quarter of 2020 into the first
quarter of 2021, with the benchmark price of West Texas
Intermediate ("WTI") averaging a low of US $40/bbl in October
2020 to an average high of US $59/bbl in February
2021. In addition, the roll-out of COVID-19 vaccines
globally in combination with economic stimulus actions have driven
oil demand improvements.
We expect vaccine progress and oil demand recovery coupled with
an improved and a sustained commodity price environment will drive
meaningful activity improvements year-over-year. However, despite
the recent momentum in commodity prices, oil and natural gas
producers will moderate capital spending as they remain committed
to cash conservation and maintaining current production levels. We
expect producers to modestly revisit drilling programs through 2021
as legacy wells decline in production, anticipated demand recovery
continues to stabilize, and global crude oil inventories
destock.
We expect a multi-year recovery cycle for our industry activity
levels and operating conditions, as global economies recover from
the fallout of the COVID-19 pandemic. Furthermore, continuing
short-term uncertainty regarding the macroeconomic conditions,
including commodity price fluctuations, set-backs in COVID-19
mitigation efforts and vaccine deployment, the pace of oil demand
recovery, and OPEC+ production and supply decisions, may impact the
demand for oil field services. In light of the current environment,
the Company has continued to adapt with conservative capital
allocation, balance sheet preservation, and a continued commitment
to debt retirement. The Company has budgeted capital expenditures
for 2021 of approximately $50.0
million. The capital plan focuses on recertifications and
preventative maintenance for its global high-spec drilling rig
fleet and other service lines.
On December 31, 2020, the Company
amended and extended the existing $900.0 million revolving Credit Facility
agreement with its syndicate of lenders. The amendments and
one-year extension provide the Company with continued access to
revolver capacity and near-term flexibility in a fluid oil price
environment.
Canadian Activity
Canadian activity, representing 19 percent of our business,
improved through the fourth quarter of 2020 and into the first
quarter of 2021 to date, due to improved commodity prices over the
winter drilling season. We expect activity to decline as we exit
the first quarter of 2021, as operations enter seasonal spring
break-up.
As of December 31, 2020, of 92
marketed drilling rigs in Canada,
approximately 34 percent are engaged under term contracts of
various durations. Approximately 39 percent of our contracted
drilling rigs in Canada have a
remaining term of six months or longer, although they may be
subject to early termination.
United States Activity
United States activity,
representing 57 percent of our business, improved modestly
over the fourth quarter of 2020 into the first quarter of 2021. We
expect US activity to remain steady and continue to modestly
improve throughout 2021. In January of 2021, the US government
temporarily halted the approval of new drilling permits and leases
on US federal lands. The Company expects minimal resulting impact
to its activity given our current customer mix and areas of current
operation.
As of December 31, 2020, of 91
marketed drilling rigs in the United
States, approximately 37 percent are engaged under term
contracts of various durations. Approximately 41 percent of our
contracted drilling rigs in the United
States have a remaining term of six months or longer,
although they may be subject to early termination.
International Activity
International activity, representing 24 percent of our
business, remained stable over the fourth quarter of 2020 and is
expected to remain steady through 2021. Operations in Argentina are expected to remain flat at
current levels with 1 drilling rig active. In the Middle East, our operations in Bahrain (2 rigs) and Kuwait (2 rigs) are expected to remain steady
through 2021 due to long-term contracts. Our Australian operations
remained steady over the fourth quarter of 2020 and are expected to
modestly improve over 2021.
As of December 31, 2020, of
40 marketed drilling rigs in our international operations,
approximately 30 percent are engaged under term contracts of
various durations. Approximately 67 percent of our contracted
drilling rigs have a remaining term of six months or longer,
although they may be subject to early termination.
RISKS AND UNCERTAINTIES
This document contains forward-looking statements based upon
current expectations that involve a number of business risks and
uncertainties. The factors that could cause results to differ
materially include, but are not limited to, the impact of the
COVID-19 virus, the potential reinstatement COVID-19 mitigation
strategies, such as stay-at-home orders and lockdown related
restrictions, economic and market conditions, crude oil and natural
gas prices, political events, foreign currency fluctuations,
weather conditions, the Company's defense of lawsuits and other
claims, and the ability of oil and gas companies to pay accounts
receivable balances and raise capital or other unforeseen
conditions which could ongoing impact on the use of the services
supplied by the Company. For a more detailed description of the
risk factors and uncertainties that face the Company and the
industry in which it operates, refer to the "Risks and
Uncertainties" section of our current Management's Discussion &
Analysis and the section titled "Risk Factors" in our current
Annual Information Form.
CONFERENCE CALL
A conference call will be held to discuss the Company's fourth
quarter 2020 results at 10:00 a.m.
MST (12:00 p.m. EST) on
Friday, March 5, 2021. The conference
call number is 1-647-427-7450 (in Toronto) or 1-888-231-8191 (outside
Toronto). A taped recording will
be available until March 12, 2021 by
dialing 1-416-849-0833 (in Toronto) or 1-855-859-2056 (outside
Toronto) and entering the
reservation number 7766149. A live broadcast may be accessed
through the Company's web site at
www.ensignenergy.com/presentations.
Ensign Energy Services Inc. is an international oilfield
services contractor and is listed on the Toronto Stock Exchange
under the trading symbol ESI.
Ensign Energy Services Inc.
Consolidated Statements
of Financial Position
As at
|
December 31
2020
|
|
December 31
2019
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
Assets
|
|
|
|
Current
Assets
|
|
|
|
Cash
|
$
|
44,198
|
|
$
|
28,408
|
Accounts
receivable
|
164,395
|
|
272,254
|
Inventories, prepaid
and other
|
52,679
|
|
47,292
|
Assets held for
sale
|
—
|
|
18,806
|
Income taxes
receivable
|
290
|
|
1,515
|
Total current
assets
|
261,562
|
|
368,275
|
|
|
|
|
Property and
equipment
|
2,649,702
|
|
2,855,223
|
Investment in joint
ventures
|
—
|
|
125,355
|
Deferred income
taxes
|
143,229
|
|
121,748
|
Total
assets
|
$
|
3,054,493
|
|
$
|
3,470,601
|
|
|
|
|
Liabilities
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts payable and
accruals
|
$
|
146,011
|
|
$
|
216,719
|
Cash dividends
payable
|
—
|
|
9,787
|
Share-based
compensation
|
251
|
|
297
|
Income taxes
payable
|
8,429
|
|
4,489
|
Current portion of
lease obligations
|
8,259
|
|
9,996
|
Total current
liabilities
|
162,950
|
|
241,288
|
|
|
|
|
Long-term
debt
|
1,384,605
|
|
1,581,529
|
Lease
obligations
|
6,042
|
|
9,518
|
Share-based
compensation
|
2,743
|
|
6,325
|
Deferred income
taxes
|
128,276
|
|
163,781
|
Non-controlling
interest
|
4,853
|
|
5,138
|
Total
liabilities
|
1,689,469
|
|
2,007,579
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
Shareholder's
capital
|
230,354
|
|
230,100
|
Contributed
surplus
|
23,324
|
|
23,966
|
Equity component of
subordinate convertible debenture
|
3,193
|
|
3,193
|
Accumulated other
comprehensive income
|
235,277
|
|
243,771
|
Retained
earnings
|
872,876
|
|
961,992
|
Total shareholders'
equity
|
1,365,024
|
|
1,463,022
|
Total liabilities and
shareholders' equity
|
$
|
3,054,493
|
|
$
|
3,470,601
|
Ensign Energy Services Inc.
Consolidated Statements
of Income (Loss)
|
Three months
ended
|
|
Twelve months
ended
|
|
December 31
2020
|
December 31
2019
|
|
December 31
2020
|
December 31
2019
|
(Unaudited - in
thousands of Canadian dollars, except per share
data)
|
|
|
|
|
|
Revenue
|
$
|
201,265
|
$
|
375,410
|
|
$
|
936,818
|
$
|
1,591,338
|
Expenses
|
|
|
|
|
|
Oilfield
services
|
136,708
|
266,460
|
|
658,201
|
1,134,328
|
Depreciation
|
96,338
|
93,537
|
|
374,705
|
363,144
|
General and
administrative
|
11,815
|
13,462
|
|
43,567
|
55,064
|
Impairment
|
11,480
|
—
|
|
11,480
|
—
|
Restructuring
|
4,448
|
1,555
|
|
16,042
|
12,644
|
Share-based
compensation
|
772
|
1,833
|
|
(2,121)
|
4,047
|
Foreign exchange and
other (gain) loss
|
(8,788)
|
4,673
|
|
(5,726)
|
25,426
|
Total
expenses
|
252,773
|
381,520
|
|
1,096,148
|
1,594,653
|
Loss before
interest expense, accretion of deferred
financing charges, other losses (gains) and income
taxes
|
(51,508)
|
(6,110)
|
|
(159,330)
|
(3,315)
|
Loss from investment
in joint ventures
|
—
|
37,981
|
|
1,349
|
39,892
|
Loss (gain) on asset
sale
|
—
|
—
|
|
3,437
|
(9,824)
|
Gain on repurchase of
unsecured Senior Notes
|
(59,260)
|
(3,077)
|
|
(162,849)
|
(4,647)
|
Interest
expense
|
24,236
|
34,717
|
|
107,374
|
135,245
|
Accretion of deferred
financing charges
|
2,972
|
2,567
|
|
11,887
|
13,914
|
Loss before income
taxes
|
(19,456)
|
(78,298)
|
|
(120,528)
|
(177,895)
|
Income tax
(recovery)
|
|
|
|
|
|
Current income
tax
|
51
|
1,965
|
|
1,140
|
3,416
|
Deferred income tax
(recovery)
|
(34,061)
|
(9,496)
|
|
(54,928)
|
(22,221)
|
Total income tax
(recovery)
|
(34,010)
|
(7,531)
|
|
(53,788)
|
(18,805)
|
Net Income (loss)
from continued operations
|
14,554
|
(70,767)
|
|
(66,740)
|
(159,090)
|
|
|
|
|
|
|
Loss from
discontinued operations
|
(11,472)
|
(202)
|
|
(12,799)
|
(4,364)
|
Net income
(loss)
|
3,082
|
(70,969)
|
|
(79,539)
|
(163,454)
|
|
|
|
|
|
|
Net income (loss)
attributable to:
|
|
|
|
|
|
Common
shareholders
|
3,092
|
(71,615)
|
|
(79,329)
|
(162,905)
|
Non-controlling
interests
|
(10)
|
646
|
|
(210)
|
(549)
|
|
$
|
3,082
|
$
|
(70,969)
|
|
$
|
(79,539)
|
$
|
(163,454)
|
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders per common share
|
|
|
|
|
|
Basic
|
$
|
0.02
|
$
|
(0.44)
|
|
$
|
(0.49)
|
$
|
(1.02)
|
Diluted
|
$
|
0.02
|
$
|
(0.44)
|
|
$
|
(0.49)
|
$
|
(1.02)
|
Ensign Energy Services Inc.
Consolidated Statements
of Cash Flows
|
Three months
ended
|
|
Twelve months
ended
|
(Unaudited - in
thousands of Canadian dollars)
|
December 31
2020
|
December 31
2019
|
|
December 31
2020
|
December 31
2019
|
Cash provided by
(used in)
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net income
(loss)
|
$
|
$3,082
|
$
|
(70,969)
|
|
$
|
(79,539)
|
$
|
(163,454)
|
Items not affecting
cash
|
|
|
|
|
|
Depreciation
|
96,338
|
93,537
|
|
374,705
|
363,144
|
Loss (gain) from
discontinued operations, net of cash
|
9,468
|
(1,338)
|
|
9,468
|
(1,338)
|
Impairment
|
11,480
|
—
|
|
11,480
|
—
|
Share-based
compensation
|
772
|
1,833
|
|
(2,121)
|
4,047
|
Loss from investment
in joint ventures
|
—
|
37,981
|
|
1,349
|
39,892
|
Loss (gain) in asset
sale
|
—
|
—
|
|
3,437
|
(9,824)
|
Gain on repurchase of
unsecured Senior Notes
|
(59,260)
|
(3,077)
|
|
(162,849)
|
(4,647)
|
Unrealized foreign
exchange and other loss (gain)
|
14,603
|
3,757
|
|
(9,998)
|
17,476
|
Accretion on deferred
financing charges
|
2,972
|
2,567
|
|
11,887
|
13,914
|
Interest
expense
|
24,236
|
34,717
|
|
107,374
|
135,245
|
Deferred income tax
recovery
|
(34,061)
|
(9,496)
|
|
(54,928)
|
(22,221)
|
Funds flow from
operations
|
69,630
|
89,512
|
|
210,265
|
372,234
|
Net change in
non-cash working capital
|
(52,237)
|
38,284
|
|
36,709
|
32,582
|
Cash provided by
operating activities
|
17,393
|
127,796
|
|
246,974
|
404,816
|
Investing
activities
|
|
|
|
|
|
Purchase of property
and equipment
|
(5,032)
|
(24,374)
|
|
(50,242)
|
(136,006)
|
Proceeds from
disposals of property and equipment
|
8,371
|
7,082
|
|
31,829
|
39,997
|
Acquisition of joint
venture and minority interest, net of cash
|
—
|
—
|
|
(31,885)
|
(49,214)
|
Net change in
non-cash working capital
|
(524)
|
(1,346)
|
|
59
|
3,139
|
Cash provided by
(used in) investing activities
|
2,815
|
(18,638)
|
|
(50,239)
|
(142,084)
|
Financing
activities
|
|
|
|
|
|
Proceeds from
long-term debt
|
12,951
|
32,177
|
|
121,520
|
2,266,408
|
Repayments of
long-term debt
|
(15,732)
|
(70,533)
|
|
(164,518)
|
(2,375,891)
|
Lease obligation
principal repayments
|
(1,812)
|
(4,892)
|
|
(9,216)
|
(10,888)
|
Interest
paid
|
(32,452)
|
(44,033)
|
|
(107,956)
|
(140,308)
|
Purchase of common
shares held in trust
|
(244)
|
(502)
|
|
(969)
|
(1,398)
|
Cash
dividends
|
—
|
(11,341)
|
|
(19,574)
|
(53,076)
|
Net change in
non-cash working capital
|
—
|
(23,349)
|
|
—
|
(2,981)
|
Cash used in
financing activities
|
(37,289)
|
(122,473)
|
|
(180,713)
|
(318,134)
|
Net (decrease)
increase in cash
|
(17,081)
|
(13,315)
|
|
16,022
|
(55,402)
|
Effects of foreign
exchange on cash
|
4,306
|
5,183
|
|
(232)
|
(1,013)
|
Cash – beginning
of period
|
56,973
|
36,540
|
|
28,408
|
84,823
|
Cash – end of
period
|
$
|
44,198
|
$
|
28,408
|
|
$
|
44,198
|
$
|
28,408
|
Ensign Energy Services Inc.
Non-GAAP Measures
Adjusted EBITDA, Adjusted EBITDA per common share and
Consolidated EBITDA. These measures do not have any standardized
meaning prescribed by IFRS and accordingly, may not be comparable
to similar measures used by other companies. The non-GAAP measures
included in this press 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.
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 or impaired 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 payment expense, impairment expenses, 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 also takes into account the Company's portion of the
principal activities of the joint venture arrangements by removing
the loss (gain) from investments in joint ventures and including
Adjusted EBITDA from investments in joint ventures. Adjusted EBITDA
is not intended to represent net loss as calculated in accordance
with IFRS.
Adjusted EBITDA
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
2019
|
|
2020
|
2019
|
Loss before income
taxes 1
|
(19,456)
|
(78,298)
|
|
(120,528)
|
(177,895)
|
Add-back/(deduct)
|
|
|
|
|
|
Interest
expense
|
24,236
|
34,717
|
|
107,374
|
135,245
|
Accretion of deferred
financing charges
|
2,972
|
2,567
|
|
11,887
|
13,914
|
Depreciation
|
96,338
|
93,537
|
|
374,705
|
363,144
|
Impairment
|
11,480
|
—
|
|
11,480
|
—
|
Share-based
compensation
|
772
|
1,833
|
|
(2,121)
|
4,047
|
Loss (gain) on asset
sale
|
—
|
—
|
|
3,437
|
(9,824)
|
Gain on repurchase of
unsecured Senior Notes
|
(59,260)
|
(3,077)
|
|
(162,849)
|
(4,647)
|
Foreign exchange and
other (gain) loss
|
(8,788)
|
4,673
|
|
(5,726)
|
25,426
|
Loss from investments
in joint ventures
|
—
|
37,981
|
|
1,349
|
39,892
|
Restructuring
|
4,448
|
1,555
|
|
16,042
|
12,644
|
Adjusted EBITDA from
investments in joint ventures
|
—
|
(84)
|
|
6,475
|
10,522
|
Adjusted
EBITDA
|
52,742
|
95,404
|
|
241,525
|
412,468
|
|
1 Comparative loss before income
taxes have been revised to conform with current year's
presentation.
|
Adjusted EBITDA from investment in joint ventures is used by
management and investors to analyze the results generated by the
Company's joint venture operations prior to how these activities
are financed, how assets are depreciated and amortized and how the
results are taxed in various jurisdictions. Additionally, in order
to focus on its core drilling and well services business, amounts
related to foreign exchange, dividend expense, dividend re-class,
impairment adjustments to property and equipment, as well as
preferred share valuation and the sale of assets are removed.
Lastly, amounts recorded for the revaluation on the investment of
the former TDI joint venture are removed as these are non-cash
items and unrelated to the operations of the business. Adjusted
EBITDA from investments in joint ventures is not intended to
represent net loss as calculated in accordance with IFRS.
Adjusted EBITDA from investment in joint ventures is calculated
below:
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2020
|
2019
|
|
2020
|
2019
|
Loss from investment
in joint ventures
|
—
|
(37,981)
|
|
(1,349)
|
(39,892)
|
Add-back/(deduct)
|
|
|
|
|
|
TDI fair
value adjustment
|
—
|
—
|
|
—
|
625
|
Depreciation
|
—
|
32,658
|
|
7,185
|
42,709
|
Foreign
exchange and other loss
|
—
|
658
|
|
229
|
588
|
Restructuring
|
—
|
—
|
|
65
|
—
|
Interest
expense
|
—
|
1,152
|
|
62
|
2,320
|
Income
taxes
|
—
|
2,965
|
|
283
|
3,549
|
Preferred shares valuation
|
—
|
464
|
|
—
|
623
|
Adjusted EBITDA from
investment in joint ventures
|
—
|
(84)
|
|
6,475
|
10,522
|
Consolidated EBITDA
Consolidated EBITDA, as defined in the Company's Credit Facility
agreement, is used in determining the Company's compliance with its
covenants. The Consolidated EBITDA is substantially similar to
Adjusted EBITDA. Consolidated EBITDA is calculated on a rolling
twelve-month basis.
Working Capital
Working capital is defined as current assets less current
liabilities as reported on the consolidated statements of financial
position.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document constitute forward-looking
statements or information (collectively referred to herein as
"forward-looking statements") within the meaning of applicable
securities legislation. Forward-looking statements generally can be
identified by the words "believe", "anticipate", "expect", "plan",
"estimate", "target", "continue", "could", "intend", "may",
"potential", "predict", "should", "will", "objective", "project",
"forecast", "goal", "guidance", "outlook", "effort", "seeks",
"schedule" or other expressions of a similar nature suggesting
future outcome or statements regarding an outlook.
Disclosure related to expected future commodity pricing or
trends, revenue rates, equipment utilization or operating activity
levels, operating costs, capital expenditures and other prospective
guidance provided throughout this document, including, but not
limited to, information provided in the "Funds Flow from Operations
and Working Capital" section regarding the Company's expectation
that funds generated by operations combined with current and future
credit facilities will support current operating and capital
requirements, information provided in the "New Builds and Major
Retrofits" section, information provided in the "Financial
Instruments" section regarding Venezuela and information provided in the
"Outlook" section regarding the general outlook for the remainder
of 2020, are examples of forward-looking statements. These
statements are not representations or guarantees of future
performance and are subject to certain risks and unforeseen
results. The reader should not place undue reliance on
forward-looking statements as there can be no assurance that the
plans, initiatives, projections, anticipations or expectations upon
which they are based will occur.
The forward-looking statements are based on current
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. They
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 crude oil and natural gas
commodity prices; fluctuations in currency and interest rates;
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; the Company's defence of lawsuits and other claims;
availability and cost of labour and other equipment, supplies and
services; the Company's ability to complete its capital programs;
operating hazards and other difficulties inherent in the operation
of the Company's oilfield services equipment; availability and cost
of financing and insurance; the Company's ability to amend
covenants under the Credit Facility with its Credit Facility
syndicate; timing and success of integrating the business and
operations of acquired companies; actions by governmental
authorities; government regulations and the expenditures required
to comply with them (including safety and environmental laws and
regulations and the impact of climate change initiatives on capital
and operating costs); the adequacy of the Company's provision for
taxes; the Company's response to the global COVID-19 pandemic and
the impact thereof upon the business environments in which the
Company is or may become engaged; and other circumstances affecting
the Company's business, revenues and expenses.
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 COVID-19 mitigation strategies, such as stay-at-home
orders and lockdown related restrictions, and the impact thereof
upon the Company, its customers and its business. Should one or
more of these risks or uncertainties materialize, or should any of
the Company's assumptions prove incorrect, actual results 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.
For additional information refer to the "Risk and Uncertainties"
section of the MD&A. Readers are cautioned that the lists of
important factors contained herein are not exhaustive.
Unpredictable or unknown factors not discussed in the MD&A
could also have material adverse effects on forward-looking
statements.
Although the Company believes the expectations conveyed by the
forward-looking statements are reasonable based on information
available to it on the date such forward-looking statements are
made, no assurances can be given as to future results, levels of
activity and achievements. Except as required by law, the Company
assumes no obligation to update forward-looking statements should
circumstances or its projections, anticipations, estimates or
opinions change.
For further information:
Michael Gray, Chief Financial Officer, (403)
262-1361
Nicole Romanow, Investor Relations,
(403) 267-6234
SOURCE Ensign Energy Services Inc.