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CALGARY, ALBERTA–(Marketwire – May 8, 2012) – CanElson Drilling Inc. (“CanElson” or the “Corporation”) (TSX:CDI) announces first quarter financial results, additional committed rig builds and declares first quarter dividend.
FIRST QUARTER 2012 HIGHLIGHTS:
First quarter EBITDA was $28.1 million and basic and diluted earnings per share was $0.21 which compares to 2011 first quarter EBITDA and basic and diluted earnings per share of $14.4 million and $0.11, respectively. The increase in these first quarter financial measures compared to the same period last year is a result of strengthening EBITDA margins and growth in the average drilling rig fleet available for operation.
Also during the first quarter, CanElson undertook a couple of key steps to advance its industry leading bi-fuel initiative. The first step was to file a patent pending for the use of flare gas to fuel mobile equipment and the second step was entering into an agreement to acquire CanGas, a containerized natural gas transport company. The Corporation continues to believe bi-fuel technology will not only reduce the environmental impact of exhaust emissions, but also reduce fuel costs as the lower priced natural gas is replacing diesel which has an estimated equivalent natural gas value of more than $30 per thousand cubic feet. Other industries with remote or mobile diesel equipment may also benefit from bi-fuel technology, and current low natural gas prices will enhance and extend its application.
CanElson is continuing its organic growth with the construction of an incremental three “purpose built” small footprint ultra-heavy-duty tele-scoping double drilling rigs (“tele-double”) added to its 2012 capital program. CanElson’s total 2012 capital program is now expected to be approximately $71 million, of which $59 million is expected to be incurred during the last nine months of 2012. The remaining 2012 capital program is comprised of: (1) $43 million for the construction and completion of five committed tele-doubles (relating to rigs #30 to #34), long lead items for one tele-double (rig #35) and other growth capital investment; and (2) approximately $16 million for spares, shop upgrades and maintenance capital.
The 2012 rig deployment schedule is as follows:
The majority of CanElson’s rig fleet continues to be purpose built tele-doubles reflecting management’s view that these are the most efficient drilling rigs from both capital and operating perspectives for resource plays that the Corporation targets. These tele-doubles are designed for minimum rig up and rig out times, lower cost transportation and highly reliable operation, especially for long-reach horizontal wells. This strategy allows CanElson to offer competitive rates through the full economic cycle and build long-term customer relationships while targeting top quartile returns for shareholders. For select resource plays CanElson is investigating customer enquiries for ultra-efficient triple drilling rigs.
The Board of Directors has declared the first quarter dividend of $0.05 per share for the three month period ended March 31, 2011, payable on June 12, 2012 to shareholders of record at the close of business on May 22, 2012. Management believes the Corporation can pursue disciplined but aggressive growth opportunities while returning value to our shareholders through a dividend.
President and CEO Randy Hawkings states, “We continue our combination of effective capital deployment and efficient operations of good people and rigs, which in turn has given us a robust financial position to support our many organic growth opportunities as well as enabling us to return a portion of our free cash flow to shareholders through a dividend.”
Hugh Borgland, Director of CanElson, is not standing for re-election at the annual general meeting. Hugh Borgland has been a valued member of the CanElson Board of Directors. The Company would like to thank Mr. Borgland for all his contributions and wishes him all the best in his future endeavors.
At the date of this press release, CanElson was operating 37 rigs: 21 drilling rigs in the WCSB, 8 (net: 7) drilling rigs in Texas, 4 drilling rigs in North Dakota, 2 (net: 1) drilling rigs and 2 (net: 1) service rigs in the Misantla-Tampico Basin of Mexico. CanElson’s owned drilling rig fleet has an average age of less than 4.5 years.
Unaudited financial information extracted from the consolidated financial statements and management’s discussion and analysis (MD&A) for the three months ended March 31, 2012 are included below. The full text of the unaudited financial statements and MD&A are to be posted on the SEDAR website at www.sedar.com.
FINANCIAL HIGHLIGHTS
(Tabular amounts are stated in thousands of Canadian dollars, except per share amounts and rig operating days)
|
Three months ended March 31, |
|||||||
|
2012 |
2011 |
change |
|||||
| Services revenue |
$ |
65,601 |
$ |
40,954 |
60% |
||
| Rig construction revenue |
$ |
– |
$ |
4,377 |
-100% |
||
| EBITDA |
(i) |
$ |
28,119 |
$ |
14,378 |
96% |
|
| Income attributable to shareholders of the corporation |
$ |
15,609 |
$ |
6,564 |
138% |
||
| Income per share | |||||||
| Basic |
$ |
0.21 |
$ |
0.11 |
91% |
||
| Diluted |
$ |
0.21 |
$ |
0.11 |
91% |
||
| Funds flow |
(ii) |
$ |
24,737 |
$ |
12,810 |
93% |
|
| Gross Margin (services) |
(iii) |
$ |
31,583 |
$ |
15,840 |
99% |
|
| Gross Profit (rig construction) |
$ |
– |
$ |
788 |
-100% |
||
| Weighted average diluted shares outstanding |
73,965 |
59,810 |
24% |
||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
| (Stated in thousands of Canadian dollars) |
March 31, |
December 31, |
|||
| ASSETS | |||||
| Current assets: | |||||
| Cash |
$ |
11,969 |
$ |
10,424 |
|
| Trade and other receivables |
50,663 |
46,123 |
|||
| Prepaid expenses and deposits |
831 |
976 |
|||
| Inventory |
37 |
49 |
|||
|
63,500 |
57,572 |
||||
| Property and equipment |
247,030 |
240,756 |
|||
| Goodwill |
25,944 |
25,944 |
|||
|
$ |
336,474 |
$ |
324,272 |
||
| LIABILITIES AND EQUITY | |||||
| Current liabilities: | |||||
| Trade payables and accrued liabilities |
21,900 |
19,925 |
|||
| Advances for rig construction |
3,672 |
– |
|||
| Deferred revenue |
1,186 |
1,364 |
|||
| Current tax liabilities |
2,234 |
4,724 |
|||
| Loans and borrowings |
4,686 |
5,481 |
|||
|
33,678 |
31,494 |
||||
| Deferred revenue |
2,107 |
2,373 |
|||
| Loans and borrowings |
3,742 |
9,051 |
|||
| Deferred tax liabilities |
28,599 |
25,103 |
|||
|
68,126 |
68,021 |
||||
| Equity | |||||
| Share capital |
205,477 |
205,139 |
|||
| Employee benefit reserve |
2,880 |
2,482 |
|||
| Foreign currency translation reserve |
1,270 |
2,371 |
|||
| Retained earnings |
47,686 |
35,749 |
|||
| Equity attributable to shareholders of the Corporation |
257,313 |
245,741 |
|||
| Equity attributable to non-controlling interest |
11,035 |
10,510 |
|||
| Total equity |
268,348 |
256,251 |
|||
|
$ |
336,474 |
$ |
324,272 |
||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
For the three month period March 31, |
||||||||
| (Stated in thousands of Canadian dollars – except per share data) |
2012 |
2011 |
||||||
| Services revenue |
$ |
65,601 |
$ |
40,954 |
||||
| Cost of sales: | ||||||||
| Other direct operating expenses |
34,018 |
25,114 |
||||||
| Depreciation |
4,112 |
2,903 |
||||||
| Stock based compensation |
180 |
84 |
||||||
|
38,310 |
28,101 |
|||||||
| Gross profit |
27,291 |
12,853 |
||||||
| Rig sales |
– |
4,377 |
||||||
| Cost of rig sales |
– |
3,589 |
||||||
| Gross profit |
– |
788 |
||||||
| Total gross profit |
27,291 |
13,641 |
||||||
| Expenses: | ||||||||
| Administration expenses |
3,464 |
2,250 |
||||||
| Business acquisition transaction costs |
– |
1,307 |
||||||
| Stock based compensation |
301 |
254 |
||||||
| Foreign exchange (gains) losses |
(16 |
) |
148 |
|||||
|
3,749 |
3,959 |
|||||||
| Income before interest and taxes |
23,542 |
9,682 |
||||||
| Interest expense |
202 |
245 |
||||||
| Income before income tax |
23,340 |
9,437 |
||||||
| Current income tax expense |
3,315 |
672 |
||||||
| Deferred income tax expense |
3,615 |
2,025 |
||||||
| Income tax expense |
6,930 |
2,697 |
||||||
| Net income |
$ |
16,410 |
$ |
6,740 |
||||
| Other comprehensive loss | ||||||||
| Foreign currency translation differences for foreign operations |
(1,377 |
) |
(794 |
) | ||||
| Total comprehensive income |
$ |
15,033 |
$ |
5,946 |
||||
| Income attributable to: | ||||||||
| Shareholders of the Corporation |
$ |
15,609 |
$ |
6,564 |
||||
| Non-controlling interest |
801 |
176 |
||||||
|
$ |
16,410 |
$ |
6,740 |
|||||
| Total comprehensive income attributable to: | ||||||||
| Shareholders of the Corporation |
$ |
14,508 |
$ |
5,915 |
||||
| Non-controlling interest |
525 |
31 |
||||||
|
$ |
15,033 |
$ |
5,946 |
|||||
| Income per share | ||||||||
| Basic |
$ |
0.21 |
$ |
0.11 |
||||
| Diluted |
$ |
0.21 |
$ |
0.11 |
||||
REVENUE AND OPERATING EXPENSE HIGHLIGHTS
|
For the three months ended March 31, |
|||||||
|
2012 |
2011 |
Change |
|||||
| Oilfield services segment | |||||||
| Services revenue | |||||||
| Domestic |
$ |
40,134 |
$ |
29,273 |
37% |
||
| Foreign |
25,467 |
11,681 |
118% |
||||
|
65,601 |
40,954 |
60% |
|||||
| Other direct operating expenses |
34,018 |
25,114 |
35% |
||||
| Gross margin |
$ |
31,583 |
$ |
15,840 |
99% |
||
| Gross margin % |
48% |
39% |
|||||
| General and administration expenses |
3,464 |
2,250 |
54% |
||||
| EBITDA |
28,119 |
14,378 |
96% |
||||
| EBITDA % |
43% |
35% |
22% |
||||
| Operating days (spud to rig release) |
2,191 |
1,506 |
45% |
||||
| Revenue per operating day (Domestic) |
$ |
28.74 |
$ |
25.61 |
12% |
||
| Revenue per operating day (Foreign) |
$ |
32.05 |
$ |
32.18 |
0% |
||
| Other operating expenses per day |
$ |
15.53 |
$ |
16.68 |
-7% |
||
| Rig construction and retrofit segment | |||||||
| Rig and equipment sales |
$ |
– |
$ |
4,377 |
nm |
||
| Cost of rig and equipment sales |
– |
3,589 |
nm |
||||
|
– |
$ |
788 |
nm |
||||
NON-GAAP MEASURES
This press release contains references to (i) EBITDA, (ii) funds flow and (iii) gross margin. These financial measures are not measures that have any standardized meaning prescribed by IFRSs and are therefore referred to as non-GAAP measures. The non-GAAP measures used by the Corporation may not be comparable to similar measures used by other companies.
| (i) | EBITDA is defined as “income before interest expense (income), income taxes, depreciation, stock based compensation expense and foreign exchange.” Management believes that in addition to Net and comprehensive income (loss), 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 the results are taxed in various jurisdictions, or how the results are affected by the accounting standards associated with the Corporation’s stock based compensation plan. | |||||
|
For the three months ended |
||||||
|
2012 |
2011 |
|||||
| Income (loss) before finance costs and taxes |
$ |
23,542 |
$ |
9,682 |
||
| Transaction costs |
– |
1,307 |
||||
| Depreciation |
4,112 |
2,903 |
||||
| Stock based compensation |
481 |
338 |
||||
| Foreign exchange loss (gain) |
(16 |
) |
148 |
|||
| EBITDA |
$ |
28,119 |
$ |
14,378 |
||
| (ii) | Funds flow from operations is defined as “cash provided by operating activities before the change in non- cash working capital”. Funds flow from operations is a measure that provides shareholders and potential investors additional information regarding the Corporation’s liquidity and its ability to generate funds to finance its operations. Management utilizes this measurement to assess the Corporation’s ability to finance operating activities and capital expenditures. | ||||
|
For the three months ended |
|||||
|
2012 |
2011 |
||||
| Operating cash flow |
$ |
19,460 |
$ |
4,397 |
|
| Changes in working capital |
5,277 |
8,413 |
|||
| Funds flow |
$ |
24,737 |
$ |
12,810 |
|
| (iii) | Gross margin is defined as “gross profit from services revenue 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 operating performance. Management utilizes this measurement to assess the Corporation’s operating performance. | ||||
|
For the three months ended |
|||||
|
2012 |
2011 |
||||
| Gross profit |
$ |
27,291 |
$ |
12,853 |
|
| Depreciation |
4,112 |
2,903 |
|||
| Stock based compensation |
180 |
84 |
|||
| Gross margin |
$ |
31,583 |
$ |
15,840 |
|
The Corporation is engaged in the manufacture, acquisition, operation and sale of rigs into business relationships involving the Corporation for the oil and gas industry. The Corporation currently operates in the western Canadian sedimentary basin (“WCSB”), the United States and Mexico. The Corporation’s WCSB operations are currently focused in Alberta, Saskatchewan and Manitoba. The United States operations are currently focused in the Permian Basin of west Texas and the Williston Basin of North Dakota. The Corporation’s Mexico operations are conducted through a joint venture Company, Diavaz CanElson de Mexico, S.A. de C.V. (“DCM” or the “Joint Venture”), of which CanElson holds a 50% ownership interest, and is currently focused in the Ebano-Panuco-Cacalilao fields of the Misantla-Tampico Basin of Mexico.
FORWARD-LOOKING INFORMATION
This press release contains certain statements or disclosures relating to CanElson that are based on the expectations of CanElson as well as assumptions made by and information currently available to CanElson which may constitute forward-looking information under applicable securities laws. In particular, this press release contains forward-looking information related to: the Corporation’s belief that bi-fuel technology will not only reduce the environmental impact of exhaust emissions, but also reduce fuel costs as the lower priced natural gas is replacing diesel which has an estimated equivalent natural gas value; management’s belief the Corporation can pursue disciplined but aggressive growth opportunities while returning value to our shareholders through a dividend; and the Corporation’s expected total 2012 capital program and deployment of additional tele-double drilling rigs in June, August, September and November 2012. Such forward looking information involves material assumptions and known and unknown risks and uncertainties, certain of which are beyond CanElson’s control. Many factors could cause the performance or achievement by CanElson to be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking information. CanElson’s Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website at www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. CanElson disclaims any intention or obligation to publicly update or revise any forward looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
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