CALGARY, AB, Nov. 10, 2022 /CNW/ - Stampede Drilling Inc. ("Stampede" or the "Corporation") (TSXV: SDI) announces today its consolidated financial and operational results for the three and nine month period ended September 30, 2022.

The following should be read in conjunction with the Corporation's consolidated financial statements and the notes thereto for the year ended December 31, 2021, related management's discussion and analysis and annual information form, 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.

THIRD QUARTER 2022 Operational HIGHLIGHTS           

For the three months ended September 30, 2022, the Corporation achieved record quarterly revenue, adjusted EBITDA and net income since its inception in 2011.

  • Revenue for the three month period ended September 30, 2022 was $20,722, up $14,240 (220%) compared to $6,482 for the corresponding 2021 period.
  • Adjusted EBITDA for the three months ended September 30, 2022 was $4,983, up $3,714 (293%) from $1,269 in the corresponding 2021 period.
  • Net income for the three months ended September 30, 2022 was $2,865, up $2,640 (1,173%) in a net income of $225 from the corresponding 2021 period.

The Corporation's record quarterly results primarily resulted from strong utilization rates. The Corporation's drilling rig utilization for the third quarter of 2022 was 68%, which was an 84% increase from the corresponding 2021 period and 70% higher than the CAOEC industry average utilization rate of 40% for the third quarter of 2022. The Corporation had a total of 822 operating days in the third quarter of 2022 an increase of 481 operating days (141%) from the 341 operating days in the corresponding 2021 period.

As previously announced on August 23, 2022, the Corporation completed an asset acquisition of five telescopic double drilling rigs and one AC electric triple rig (the "Asset Acquisition") which increased the Corporation's fleet from 13 to 19. As of the date of this News Release, the Corporation has fully crewed and contracted two out of the five double rigs acquired pursuant to the Asset Acquisition and anticipates the remaining acquired rigs to be crewed and contracted in late Q4 2022 into January 2023. The high spec triple rig is expected to begin operations in June 2023 once capital upgrades have been completed. During the third quarter of 2022, the Corporation had all 13 of its pre-existing rigs operating.

Concurrently with the Asset Acquisition, the Corporation announced the closing of a public offering of common shares for aggregate gross proceeds of $26,625 (the "Offering").  Pursuant to the Offering 83,202 common shares of the Corporation were issued.  The Corporation directed approximately $21,500 of the proceeds of the Offering towards the purchase price of the Asset Acquisition and a portion of related upgrades.

The Corporation also entered into an amending agreement with HSBC Bank of Canada to increate the aggregate credit capacity under its credit facility (the "Credit Facility"). Under the Credit Facility, which has an initial term of three years, the Corporation has an available limit of $22,500 pursuant to a revolving facility (the "Demand Facility") and $10,000 under a term loan (the "Term Loan").  The proceeds of the term loan were used to help finance the Asset Acquisition in the third quarter and corresponding portion of the capital expenditures of the newly acquired rigs.  

The Corporation had a total capital spend of $24,933 in the third quarter of 2022 primarily related to the Asset Acquisition during the quarter and the remaining upgrades on the three rigs acquired in the second quarter of 2022.

OUTLOOK

As we head into the last quarter of 2022, the Corporation anticipates that commodity pricing volatility will continue due to current global macroeconomic factors such as the war in Ukraine and worldwide inflationary pressures. As a result of these macroeconomic factors, the Corporation anticipates industry activity and corresponding rig utilization for the remainder of the year and into 2023 to remain strong. The Corporation anticipates above historical average utilization and day rates based on its current customer contracts while managing industry wide inflationary costs due to wage increases needed to attract and retain field hands and supply chain constraints in Western Canada and globally.

The Corporation has a proven track record of purchasing underutilized drilling rigs and ancillary equipment at favourable prices, and then successfully crewing them and deploying them under profitable drilling contracts. The Corporation intends to continue to use this proven strategy with its six newly acquired rigs, with a goal of building on its record breaking Q3 2022 results. The Corporation will continue to assess additional acquisition opportunities as they arise, as well as making focused capital expenditures to further enhance customer desirability of its current fleet.

The Corporation is actively managing the impact of cost increases due to industry-wide inflation by working with its customers and vendors to control and fairly allocate such costs.

FINANCIAL SUMMARY


Three months ended
September 30,

Nine months ended
September 30,



(000's CAD $ except per share amounts)

2022

2021

%
Change

2022

2021

%
Change



Revenue

20,722

6,482

220 %

43,642

22,983

90 %



Direct operating expenses

13,932

4,107

239 %

29,497

14,124

109 %



Gross margin (1)

6,790

2,375

186 %

14,145

8,859

60 %



Net income

2,865

225

1,173 %

4,727

2,480

91 %



Basic and diluted earnings per share

0.02

0.00

nm

0.03

0.02

50 %



Adjusted EBITDA (1)

4,983

1,269

293 %

9,568

6,412

49 %



Weighted average common shares outstanding

168,187

132,166

27 %

144,313

132,138

9 %



Weighted average diluted common shares outstanding

183,095

132,899

38 %

159,231

144,905

10 %



Capital expenditures

24,933

1,362

nm

36,602

2,781

nm



Number of marketed rigs

19

10

90 %

19

10

90 %



Drilling rig utilization

68 %

37 %

84 %

59 %

44 %

34 %



CAOEC industry average utilization(2)

40 %

27 %

48 %

34 %

23 %

48 %



nm - not meaningful
(1) Refer to "Non-GAAP Measures" for further information.
(2) Source: The Canadian Association of Energy Contractors ("CAOEC") monthly Contractor Summary. The CAOEC industry average is based on Operating Days divided by total available drilling days.








DESCRIPTION oF STAMPEDE'S BUSINESS

Stampede is an energy services company that provides premier contract drilling services in Western Canada. Stampede operates a fleet of 18 telescopic double drilling rigs and 1 high spec triple drilling rig suited for most formations within the Western Canadian Sedimentary Basin ("WCSB"). The Corporation's head office is located in Calgary, Alberta with operations based out of Nisku, Alberta and Estevan, Saskatchewan. The Corporation's common shares trade on the TSX Venture Exchange under the symbol "SDI".

RESULTS FROM OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2022


Nine months ended September 30,



(000's CAD $ except operating days)

2022

2021

% Change



Revenue

43,642

22,983

90 %



Direct operating expenses

29,497

14,124

109 %



Gross margin(1)

14,145

8,859

60 %



Gross margin %(1)

32 %

39 %

(18 %)



Net income

4,727

2,480

91 %



General and administrative expenses

4,874

3,015

62 %



Adjusted EBITDA(1)

9,568

6,412

49 %



Drilling rig operating days(2)

1,807

1,187

52 %



Drilling rig revenue per day(3)

24.2

19.4

25 %



Drilling rig utilization(4)

59 %

44 %

34 %



CAOEC industry average utilization(5)

34 %

23 %

48 %



nm - not meaningful
(1) Refer to "Non-GAAP and Other Financial Measures" for further information.
(2) Defined as contract drilling days, between spud to rig release
(3) Drilling rig revenue per day is calculated by revenue divided by drilling rig operating days
(4) Drilling rig utilization is calculated based on operating days (spud to rig release)
(5) Source: The Canadian Association of Energy Contractors ("CAOEC") monthly Contractor Summary.









  • Revenue for the nine month period ended September 30, 2022 was $43,642, up $20,659 (90%) compared to $22,983 for the corresponding 2021 period. The increase was primarily related to increased customer activity levels due to increased demand and higher rig count and increased day rates with the Corporation's customer base.
  • The Corporation had a total of 1,807 operating days for the nine month period ended September 30, 2022, an increase of 620 operating days (52%) from the 1,187 operating days in the corresponding 2021 period. Operating days increased as a result of higher demand along with the increase in rig count compared to the prior period.
  • The Corporation's drilling rig utilization for the nine month period ended September 30, 2022 was 59%, which was a 34% increase from the corresponding 2021 period and 74% higher than the CAOEC industry average utilization rate of 34% for 2022.
  • Gross margin percentage for the nine month period ended September 30, 2022 was 32%, down 18% from 39% as compared to the corresponding 2021 period. The gross margin decrease was primarily related to higher rig operating expenses due to inflationary pressures partially offset by the increase in revenue per day. The Corporation did not record any Canadian Emergency Wage Subsidy ("CEWS") during the nine month period of 2022 as compared to $2,012 for the corresponding 2021 period. In accordance with its accounting policy, the Corporation recorded a portion of it's 2021 CEWS subsidy as a reduction of direct operating expenses.
  • For the nine month period ended September 30, 2022, general and administrative expenses were $4,874 up $1,859 (62%) from $3,015 compared to the corresponding 2021 period. The increase is primarily related to increased headcount and compensation and corresponding administration expenses due to the increased 2022 activity levels.
  • Adjusted EBITDA for the nine months ended September 30, 2022 was $9,568, up $3,156 (49%) from $6,412 from the corresponding 2021 period. The increase is primarily related to higher revenue due to increased customer demand and revenue per day and partially offset by higher operating expenses and general and administrative expenses. Additionally, in 2021, the Corporation recorded $254 as a reduction in salaries and benefits expense for a portion of the CEWS and $131 as a reduction in administrative expenses for the Canada Emergency Rent Subsidy ("CERS"). There were no CEWS or CERS recorded in 2022.
  • Net income for the nine months ended September 30, 2022 was $4,727, up $2,247 (91%) from $2,480 from the corresponding 2021 period. The increase is primarily related to increased operating days and revenue per day and partially offset by higher operating expenses.

NON-GAAP AND OTHER FINANCIAL MEASURES

This news release contains references to (i) adjusted EBITDA, (ii) Gross margin and (iii) Gross margin percentage. 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 asset disposals, impairment expenses, other income, foreign exchange, non-recurring restructuring charges, finance costs, accretion of debentures and other income/expenses, foreign exchange gain 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 income (loss), adjusted EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how these activities are financed, how assets are depreciated, amortized and impaired, the impact of foreign exchange, or how the results are affected by the accounting standards associated with the Corporation's stock-based compensation plan. Investors should be cautioned, however, that adjusted EBITDA should not be construed as an alternative to net income (loss) and comprehensive income (loss) determined in accordance with IFRS as an indicator of the Corporation's performance. The Corporation's method of calculating adjusted EBITDA may differ from that of other organizations and, accordingly, its adjusted EBITDA may not be comparable to that of other companies.




Three months ended September 30,


Nine months ended September 30,

(000's CAD $)

2022

2021

%
Change


2022

2021

%
Change

Net income

2,865

225

1,173 %


4,727

2,480

91 %

Depreciation

1,169

1,092

7 %


3,325

3,364

(1 %)

Finance costs

387

165

135 %


796

509

56 %

Other income

(2)

-

nm


(9)

(8)

13 %

Loss (gain) on asset disposal

3

(262)

(101 %)


3

(301)

(101 %)

Share-based payments

29

52

(44 %)


144

328

(56 %)

Transaction costs

569

-

nm


595

-

nm

Foreign exchange (gain) loss

(37)

(3)

1,133 %


(13)

40

(133 %)

Adjusted EBITDA

4,983

1,269

293 %


9,568

6,412

49 %

nm - not meaningful










(i)

Gross margin - is defined as "Income from operations before depreciation of property and equipment". 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) 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.

(ii) 

Gross margin percentage - is calculated as gross margin divided by revenue. The Corporation believes gross margin as a percentage of revenue is an important measure to determine how the Corporation is managing its revenues and corresponding cost of sales.



The following table reconciles the Corporation's income from operations, being the most directly comparable financial measure disclosed in the Corporation's interim financial statements, to gross margin:


Three months ended September 30,


Nine months ended September 30,

(000's CAD $)

2022

2021

% Change


2022

2021

% Change

Income from operations

5,682

1,363

317 %


10,973

5,735

91 %

Depreciation of property and equipment

1,108

1,012

9 %


3,172

3,124

2 %

Gross margin

6,790

2,375

186 %


14,145

8,859

60 %

Gross margin %

33 %

37 %

(11 %)


32 %

39 %

(18 %)


FORWARD-LOOKING INFORMATION

Certain statements contained in this News 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 "anticipate", "plan", "contemplate", "continue", "estimate", "expect", "intend", "propose", "might", "may", "will", "could", "should", "believe", "predict", and "forecast" are intended to identify forward-looking information.

This News Release contains forward-looking information pertaining to, among other things: the Corporation's performance; expectations associated with the Corporation's outlook, including among other things, anticipated commodity pricing and the volatility thereof, expectations about industry activities, market conditions and corresponding rig utilization; the crewing and contracting of the Corporation's recently acquired rigs not in operation as at the date of this News Release and the timing thereof; the operation of the Corporation's high spec triple rig recently acquired and the timing thereof; the assessment of additional acquisition opportunities by the Corporation; expected increases in utilization and day rates and the anticipated profitability of the Corporation resulting therefrom; anticipated industry wide inflationary costs and supply chain constraints and the resulting impact on the profitability of the Corporation; and the continued financial resiliency of the Corporation.

Forward-looking information is based on certain assumptions that Stampede has made in respect thereof as at the date of this News Release regarding, among other things: the Corporation's ability to fully crew and contract its rigs; the success of the measures implemented by the Corporation to ensure the safe, efficient and reliable operations at each of its drilling sites; the creditworthiness of the Corporation's customers and counterparties; the effectiveness of the Corporation's financial risk management policies at ensuring all payables are paid within the pre-agreed credit terms; that the Corporation has adequate access to its credit facility to provide the necessary liquidity needed to manage fluctuations in the timing of receipt and/or disbursement of operating cash flows; the belief that adjusted EBITDA, gross margin and gross margin percentage are useful supplemental financial measures; the ability of the Corporation to retain qualified staff; the ability of the Corporation to maintain key customers; the ability of the Corporation to obtain financing on acceptable terms; the belief that the Corporation's principal sources of liquidity will be sufficient to service its debt and fund its operations and other strategic opportunities; the ability of the Corporation to obtain financing on acceptable terms; the ability to protect and maintain the Corporation's intellectual property; the Corporation's ability to maintain financial resiliency in light of current macroeconomic conditions; and the regulatory framework regarding taxes and environmental matters in the jurisdictions in which the Corporation operates.

Forward-looking information is presented in this News 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.

While Stampede believes the expectations and material factors and assumptions reflected in the forward-looking information is reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. Forward-looking information is not a guarantee of future performance and actual results or events could differ materially from the expectations of the Corporation expressed in or implied by such forward-looking information. Accordingly, readers should not place undue reliance on forward-looking information. All forward-looking information is subject to a number of known and unknown risks and uncertainties including, but not limited to: the condition of the global economy, including trade, inflation, the ongoing conflict in Ukraine and other geopolitical risks; the condition of the crude oil and natural gas industry and related commodity prices; other commodity prices and the potential impact on the Corporation and the industry in which the Corporation operates, including levels of exploration and development activities; the impact of increasing competition; fluctuations in operating results; the ongoing significant volatility in world markets and the resulting impact on drilling and completions programs; foreign currency exchange rates; interest rates; labour and material shortages; cyber security risks; natural catastrophes; and certain other risks and uncertainties detailed in the Corporation's annual management's discussion and analysis and annual information form, each dated March 24, 2022 for the year ended December 31, 2021, and from time to time in Stampede's public disclosure documents available at www.sedar.com.

This list of risk factors should not be construed as exhaustive. Readers are cautioned that events or circumstances could cause actual results to differ materially from those predicted, forecasted, or projected. Statements, including forward-looking information, are made as of the date of this News 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 News Release is expressly qualified by this cautionary statement.

SOURCE Stampede Drilling Inc.

Copyright 2022 Canada NewsWire

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