CALGARY, May 14, 2020 /CNW/ - Stampede Drilling Inc.
("Stampede" or the "Corporation") (TSX-V: SDI) announces today its
financial and operational results for the three months ended
March 31, 2020.
The following should be read in conjunction with the
Corporation's unaudited condensed consolidated interim financial
statements and the notes thereto for the three months period ended
March 31, 2020 and related
management's discussion and analysis, which are available on SEDAR
at www.sedar.com.
All amounts or dollar figures are denominated in thousands of
Canadian dollars except for per share amounts, number of drilling
rigs, and operating days, or unless otherwise noted.
Estimates and forward-looking information are based on
assumptions of future events and actual results may vary from these
estimates. See "Forward-Looking Information" in this press release
for additional details.
Q1 2020 OPERATIONAL OVERVIEW
Global oil prices declined significantly during the Q1 2020
period as a result of reduced demand driven by the novel
coronavirus ("COVID-19") health pandemic and over supply concerns
stemming from failed negotiations between OPEC+ countries on
production curtailments. As a result, the Corporation's
customer base have announced significant reductions of their
remaining 2020 capital budgets.
During the three months ended March 31,
2020, the Corporation recorded Adjusted EBITDA from
continuing operations of $2,584, up
3% from the prior year comparative period. Increased Q1 2020
operating days during January and February resulted in a 40%
increase in revenue of $10,890 as
compared $7,763 from the prior year
comparative period. The Corporation's Q1 2020 utilization rate
was 58%, which was 66% higher than the CAODC average
utilization.
The Corporation recognized net income from continuing operations
of $1,135 during the three months
ended March 31, 2020, compared to net
income of $1,211 during the prior
year comparative period. Net income and Adjusted EBITDA from
continuing operations were negatively impacted by higher repairs
and maintenance costs and the reallocation of Corporate G&A
expenses after the sale of the directional drilling division in Q2
2019.
RECENT ECONOMIC DEVELOPMENTS
In March 2020, the World Health
Organization declared a global pandemic following the emergence and
rapid spread of a novel strain of the coronavirus
("COVID-19"). The outbreak and subsequent measures intended
to limit the pandemic contributed to significant declines and
volatility in the financial markets. The pandemic adversely
impacted global commercial activity, including significantly
reducing worldwide demand for crude oil. Crude oil prices
have also been severely impacted by increased global supply due to
disagreements over production restrictions between the Organization
of Petroleum Exporting Countries ("OPEC") and non-OPEC members,
primarily Saudi Arabia and
Russia. The full extent of the
impact of COVID-19 on the Corporation's operations and future
financial performance is currently unknown. It will depend on
future developments that are uncertain and unpredictable, including
the duration and spread of COVID-19, its continued impact on
capital and financial markets on a macro-scale and any new
information that may emerge concerning the severity of the virus.
These uncertainties may persist beyond when it is determined
how to contain the virus or treat its impact. The outbreak
presents uncertainty and risk with respect to the Corporation, its
performance, and estimates and assumptions used by the Corporation
in the preparation of its financial results.
OUTLOOK
As concerns around COVID-19 continue, the Corporation's
employees' health and safety remains the primary concern. Since
mid-March, measures have been implemented to protect both the field
and office employees while ensuring business continuity. COVID-19,
combined with crude over supply, will have a significant effect on
the Corporation's financial results. However, through maintaining
cost and capital discipline while providing exceptional service to
our customers, the Corporation is positioned to withstand the
impact this commodity price cycle will have on forecasted activity
levels for the remainder of 2020 and into 2021.
The following key cost and discretionary spending plan
adjustments were implemented in March
2020:
- Reduction of forecasted personnel costs consisting of salary
reductions, layoffs and job sharing.
- Reduction of all capital expenditures to only necessary
sustaining expenditures reflective of forecasted levels of
activity.
- 18% to 36% reduction to Executive cash compensation.
- 100% reduction to Board of Directors cash compensation.
- Elimination of all non-essential travel, entertainment and
other discretionary spending.
With regards to the $2,612
convertible debenture due in October
2020, the Corporation is currently assessing its options to
extend the maturity date of the debenture or convert the debenture
to equity on the maturity date.
OUTLOOK (continued)
While these cost reductions have been significant, the
Corporation continues to review all aspects of the business for
further optimization with our customers and cost reduction
opportunities.
FINANCIAL HIGHLIGHTS
FIRST QUARTER 2020 SUMMARY (Compared with the first
quarter 2019)
- Revenue from continuing operations of $10,890, up 40% from $7,763;
- Gross margin from continuing operations of $3,529, up 5% from $3,360;
- Adjusted EBITDA from continuing operations of $2,584, up 3% from an Adjusted EBITDA
$2,499;
- Net income from continuing operations of $1,135, down 6% from $1,211;
- Net income from combined operations of $1,135, down 44% from $2,041
|
Three months ended
March 31,
|
(000's CAD $
except per share amounts)
|
2020
|
2019
|
%
Change
|
Continuing
operations
|
|
|
|
Revenue
|
10,890
|
7,763
|
40%
|
Direct operating
expenses
|
7,361
|
4,403
|
67%
|
Gross margin
(1)
|
3,529
|
3,360
|
5%
|
Net income from
continuing operations
|
1,135
|
1,211
|
(6%)
|
Basic per
share
|
0.01
|
0.01
|
nm
|
Diluted per
share
|
0.01
|
0.01
|
nm
|
Adjusted EBITDA
(1)
|
2,584
|
2,499
|
3%
|
Weighted average
common shares outstanding
|
132,046
|
131,615
|
0%
|
Weighted average
diluted common shares outstanding
|
145,528
|
137,171
|
6%
|
Combined
operations (2)
|
|
|
|
Net income
|
1,135
|
2,041
|
(44%)
|
Basic per
share
|
0.01
|
0.02
|
nm
|
Diluted per
share
|
0.01
|
0.01
|
nm
|
Adjusted EBITDA
(1)
|
2,584
|
3,028
|
(15%)
|
Capital
expenditures
|
705
|
255
|
176%
|
nm - not
meaningful
|
(1) Refer to "Non-GAAP Measures" for
further information.
|
(2) Combined operations represents
the aggregated results of both continuing and discontinued
operations.
|
|
Three months ended
March 31,
|
(000's CAD $
except operating days)
|
2020
|
2019(1)
|
%
Change
|
|
|
|
|
Revenue
|
10,890
|
7,763
|
40%
|
Direct operating
expenses
|
7,361
|
4,403
|
67%
|
Gross margin
(2)
|
3,529
|
3,360
|
5%
|
Gross margin
%
|
32%
|
43%
|
(26%)
|
Net income from
continuing operations
|
1,135
|
1,211
|
(6%)
|
General and
administrative expenses
|
1,142
|
998
|
14%
|
Adjusted EBITDA
(2)
|
2,584
|
2,499
|
3%
|
Adjusted EBITDA as a
% of revenue
|
24%
|
32%
|
(25%)
|
Drilling rig
operating days
|
531
|
378
|
40%
|
Drilling rig revenue
per day
|
20.5
|
20.5
|
0%
|
Drilling rig
utilization
|
58%
|
52%
|
12%
|
CAODC industry
average utilization (3)
|
35%
|
29%
|
21%
|
(1) The
comparative period has been restated to reflect discontinued
operations as discussed in Note 4.
|
(2) Refer to "Non-GAAP measures" for
further information.
|
(3) Source: The Canadian Association
of Oilwell Drilling Contractors ("CAODC"). The CAODC industry
average is based on operating days divided by total available
drilling days.
|
|
RESULTS OF CONTINUING OPERATIONS FOR THE PERIOD ENDED
MARCH 31, 2020
- First quarter revenue increased by $3,127 (40%) to $10,890 in 2020 as compared to $7,763 in 2019. The increase was as a result of
an increase in operating days due to the higher average rig count
in the first quarter of 2020. The revenue per day in the first
quarter of 2020 remained consistent with the revenue per day in the
first quarter of 2019.
- Operating days in the drilling rig division of 531 days for the
first quarter of 2020 was 153 days (40%) higher than the 378
operating days in corresponding period of the prior year , as a
result of the increase in rig count during the period and continued
positive momentum in the drilling rig division. The drilling rig
utilization for the first quarter of 2020 was 58%, 66% above the
CAODC industry average utilization rate of 35%.
- For the first quarter of 2020, gross margin as a percentage of
revenue was 32%, 26% lower than the first quarter of 2019 of 43%
due to higher direct operating expenses from repair and maintenance
expenses combined with higher start up costs for rigs that began
operations in the first quarter of 2020.
- For the period ended March 31,
2020, net income from continuing operations of $1,135 was down $76
(6%) compared to net income of $1,211
during the prior year comparative period. For the period ended
March 31, 2020, Adjusted EBITDA was
$2,584 an $85 (3%) increase from $2,499 as compared to the corresponding 2019
period, as a result of the increase in active rig count which was
partially offset by the increased general and administrative
expenses compared to 2019. Net income and Adjusted EBITDA from
continuing operations were negatively impacted by start up costs
incurred for rigs that began operations in the first quarter and
the reallocation of Corporate G&A expenses after the sale of
the directional drilling division in Q2 2019.
- General and administrative expenses for the first quarter of
2020 were $1,142 up $144 (14%) from $998 for the comparable period of 2019, as a
result of increased headcount and the higher allocation of
corporate expenses related to salaries, legal, IT, and rent as part
of the Corporation's continuing operations as part of the
discontinuation of the directional drilling division in Q2
2019.
Other
Items
|
|
Three months ended
March 31,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
Gain from equipment
lost in hole
|
-
|
15
|
(100%)
|
Finance
costs
|
(221)
|
(175)
|
26%
|
Other
income
|
24
|
42
|
(43%)
|
Foreign exchange
gain
|
35
|
4
|
775%
|
Transaction
costs
|
-
|
(99)
|
(100%)
|
Other
items
|
(162)
|
(213)
|
(24%)
|
For the period ended March 31,
2020, finance costs were $221,
a $46 (26%) increase from
$175 as compared to the first quarter
of 2019. The increase was due to higher 2020 debt levels
associated with the Corporation's line of credit. The higher
2020 debt levels as compared to the first quarter of 2019 were a
result of increased capital spend and working capital as a result
of increased activity for the period ended March 31, 2020 compared to the corresponding
period of the prior year.
For the period ended March 31,
2020, other income was $24 as
compared to $42 in the corresponding
2019 period. Other income is comprised of rent collections from the
Corporation's subleases.
For the period ended March 31,
2020, there were no transaction costs incurred compared to
$99 (100%) in the corresponding 2019
period. Transaction costs for 2019 consisted of non-capitalizable
amounts related to US start-up costs.
RESULTS OF DISCONTINUED OPERATIONS
On April 3, 2019, the Corporation
announced the discontinuation of its directional drilling division.
As part of this process, the Corporation presented the results of
the directional drilling operations using the guidance under "IFRS
5 - Non-Current Assets Held for Sale and Discontinued Operations",
as discontinued operations on the consolidated statements of
comprehensive income (loss) and the consolidated statements of cash
flows for the current and comparative periods.
During the second quarter of 2019, the Corporation disposed of
its directional drilling assets to an independent, third-party
purchaser.
RESULTS OF DISCONTINUED OPERATIONS (continued)
The following sets forth the operating results and cashflows
from discontinued operations for the comparative period ended
March 31, 2019:
|
Three months ended
March 31,
|
|
2019
|
|
|
Revenue
|
1,835
|
|
|
Cost of
sales:
|
|
Direct operating
expenses
|
928
|
Depreciation of
property and equipment
|
-
|
|
928
|
|
|
Income from
operations
|
907
|
|
|
Expenses
|
|
Administrative
expenses
|
85
|
Salaries, benefits,
and severance
|
293
|
Share based
payments
|
7
|
|
385
|
Net income before
interest and other income
|
522
|
|
|
Loss from disposition
of property and equipment
|
(2)
|
Gain from equipment
lost in hole
|
307
|
Foreign exchange
gain
|
3
|
Net Income -
discontinued operations
|
830
|
NON-GAAP MEASURES
This press release contains references to (i) Adjusted EBITDA
and (ii) Gross margin. These financial measures are not measures
that have any standardized meaning prescribed by IFRS and are
therefore referred to as non-GAAP (Generally Accepted Accounting
Principles) measures. The non-GAAP measures used by the Corporation
may not be comparable to similar measures used by other
companies.
(i) Adjusted EBITDA is
defined as "income (loss) from operations before interest income,
interest expense, taxes, transaction costs, depreciation and
amortization, share-based compensation expense, gains on disposal
of property and equipment, impairment expenses, other income,
foreign exchange, non-recurring restructuring charges, finance
costs, accretion of debentures and other income/expenses, and any
other items that the Corporation considers appropriate to adjust
given the irregular nature and relevance to comparable operations."
Management believes that in addition to net and total comprehensive
income (loss), Adjusted EBITDA is a useful supplemental measure as
it provides an indication of the results generated by the
Corporation's principal business activities prior to consideration
of how these activities are financed, how assets are depreciated,
amortized and impaired, the impact of foreign exchange, or how the
results are affected by the accounting standards associated with
the Corporation's stock-based compensation plan. Investors should
be cautioned, however, that Adjusted EBITDA should not be construed
as an alternative to net income (loss) and comprehensive income
(loss) determined in accordance with IFRS as an indicator of the
Corporation's performance. The Corporation's method of calculating
Adjusted EBITDA may differ from that of other organizations and,
accordingly, its Adjusted EBITDA may not be comparable to that of
other companies.
NON-GAAP MEASURES (continued)
|
Three months ended
March 31,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
Net loss from
continuing operations
|
1,135
|
1,211
|
(6%)
|
Depreciation
(1)
|
1,192
|
1,046
|
14%
|
Finance
costs
|
221
|
175
|
26%
|
Other
income
|
(24)
|
(42)
|
(43%)
|
Gain from equipment
lost in hole
|
-
|
(15)
|
(100%)
|
Share-based
payments
|
95
|
29
|
228%
|
Transaction
costs
|
-
|
99
|
(100%)
|
Foreign exchange
gain
|
(35)
|
(4)
|
nm
|
Adjusted
EBITDA
|
2,584
|
2,499
|
3%
|
nm - not
meaningful
|
|
|
|
(1) Includes depreciation of property
and equipment and right-of-use assets
|
(i) Gross margin is defined
as "gross profit from services revenue from continuing operations
before stock-based compensation and depreciation". Gross margin is
a measure that provides shareholders and potential investors
additional information regarding the Corporation's cash generating
and operating performance. Management utilizes this measure to
assess the Corporation's operating performance. Investors should be
cautioned, however, that gross margin should not be construed as an
alternative to net income (loss) and comprehensive income (loss)
determined in accordance with IFRS as an indicator of the
Corporation's performance. The Corporation's method of calculating
gross margin may differ from that of other organizations and,
accordingly, its gross margin may not be comparable to that of
other companies.
|
Three months ended
March 31,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
Income from
operations
|
2,439
|
2,422
|
1%
|
Depreciation of
property and equipment
|
1,090
|
938
|
16%
|
Gross
margin
|
3,529
|
3,360
|
5%
|
Gross margin
%
|
32%
|
43%
|
(26%)
|
FORWARD-LOOKING INFORMATION
Certain statements contained in this press release constitute
forward-looking statements or forward-looking information
(collectively, "forward-looking information"). Forward-looking
information relates to future events or the Corporation's future
performance. All information other than statements of historical
fact is forward-looking information. The use of any of the words
"plan", ""continue", "estimate", "expect", "intend", "might",
"may", "will", "should", "believe", "predict", and "forecast" are
intended to identify forward-looking information. This press
release contains forward-looking information pertaining to, among
other things: the Corporation's expectations regarding the impact
on macro-economic factors of the COVID-19 virus, of instability
created by OPEC's inability to maintain the global oil supply and
the resulting impact of both on commodity prices; the effect of
measures implemented by the Corporation to protect its field and
office employees while ensuring business continuity; the
Corporation's expectation that Canadian oil and gas producers will
continue to be faced with the challenge of exporting their products
due to uncertainty surrounding the timing of the Trans Mountain
pipeline expansion project; the Corporation's capital expenditure
budget for 2020 and expected responses to COVID-19 and commodity
pricing; the Corporation's ability to withstand the impact the
current commodity price cycle will have on its forecasted activity
levels for the remainder of 2020 and into 2021; the belief
that Adjusted EBITDA is a useful supplemental financial measure;
the expectation of having full access to its Operating Loan
facility to fund 2020 operations and other strategic opportunities;
the ability of the Corporation to extend the maturity date of its
$2,612 convertible debenture due in
October 2020, or to convert the
debenture to equity on the maturity date; and the expected effects
of seasonality and weather on the Corporation's operations and
business, amongst others.
Forward-looking information is presented in this press release
for the purpose of assisting investors and others in understanding
certain key elements of the Corporation's financial results and
business plan, as well as the objectives, strategic priorities and
business outlook of the Corporation, and in obtaining a better
understanding of the Corporation's anticipated operating
environment. Readers are cautioned that such forward-looking
information may not be appropriate for other purposes.
Forward-looking information, by its very nature, is subject to
inherent risks and uncertainties and is based on many assumptions,
both general and specific, which give rise to the possibility that
actual results or events could differ materially from the
expectations of the Corporation expressed in or implied by such
forward-looking information and that the Corporation's business
outlook, objectives, plans and strategic priorities may not be
achieved. Macro-economic conditions, including public health
concerns (including the impact of the COVID-19 pandemic) and other
geopolitical risks, the condition of the global economy and,
specifically, the condition of the crude oil and natural gas
industry including the collapse of global crude oil prices, other
commodity prices and the decrease in global demand for crude oil in
2020, and the ongoing significant volatility in world markets may
adversely impact drilling and completions programs, which could
materially adversely impact the Corporation. In addition to other
factors and assumptions which may be identified in this press
release, assumptions have been made regarding, among other things:
the condition of the global economy, including trade, public health
(including the impact of the COVID-19 pandemic) and other
geopolitical risks; the stability of the economic and political
environment in which the Corporation operates; the success of the
measures implemented by the Corporation to protect its field and
office employees and the ability to ensure business continuity at
the same time; the ability of the Corporation to retain qualified
staff; the ability of the Corporation to obtain financing on
acceptable terms; the impact of increasing competition; the ability
to protect and maintain the Corporation's intellectual property;
currency, exchange and interest rates; the regulatory framework
regarding taxes and environmental matters in the jurisdictions in
which the Corporation operates; and the ability of the Corporation
to successfully implement key cost and discretionary spending plan
adjustments. Actual results and future events could differ
materially from those expected or estimated in such forward-looking
information. As a result, the Corporation cannot guarantee
that any forward-looking information will materialize and we
caution you against relying on any of this forward-looking
information. Accordingly, readers should not place undue reliance
on forward-looking information.
Additional information on these and other factors are disclosed
in our most recently filed management's discussion and analysis,
including under the heading "Risks and Uncertainties" therein, in
the Corporation's annual information form dated March 25, 2020, and in other reports filed with
the securities regulatory authorities in Canada from time to time and available on
SEDAR (sedar.com).
Statements, including forward-looking information, are made as
of the date of this press release and the Corporation does not
undertake any obligation to update or revise any forward-looking
information, whether as a result of new information, future events
or otherwise, except as may be required by applicable securities
laws. The forward-looking information contained in this press
release is expressly qualified by this cautionary statement.
Neither the TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE Stampede Drilling Inc.