Stoneham Drilling Trust
TSX : SDG.UN

Stoneham Drilling Trust

March 25, 2010 09:00 ET

STONEHAM DRILLING TRUST (TSX:SDG.UN) Announces Financial Results for the Fourth Quarter and Year Ended December 31, 2009

CALGARY, ALBERTA--(Marketwire - March 25, 2010) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

Stoneham Drilling Trust ("Stoneham" or the "Trust") (TSX:SDG.UN) continued to experience the effects of depressed industry conditions in the fourth quarter of 2009 with lower revenue, operating margins and rig utilization. However, rig utilization in the fourth quarter significantly improved from utilization rates experienced in the second and third quarters of 2009.



FINANCIAL HIGHLIGHTS

(000s except for Three months ended December 31, Year ended December 31,
per trust unit 2009 2008 Change 2009 2008 Change
amounts) $ $ $ $

Revenue 18,141 37,071 -51% 60,023 112,691 -47%
Net earnings 694 8,879 -92% 857 14,984 -94%
Per trust unit
(basic and
diluted) 0.09 1.11 -92% 0.11 1.87 -94%
Cash flow from
operations (1) 4,120 12,691 -68% 9,554 27,070 -65%
Per trust unit
(basic and diluted) 0.51 1.58 -68% 1.19 3.37 -65%
Cash flow from
operating activities (4,067) 12,643 -132% 19,493 22,018 -11%
Per trust unit
(basic and diluted) (0.51) 1.58 -132% 2.43 2.74 -11%
EBITDA (1) 4,958 13,712 -64% 13,536 31,422 -57%

Distributions paid
and payable - 2,407 -100% 802 11,434 -93%
Units outstanding
(weighted average
and diluted) 8,023 8,023 - 8,023 8,023 -


(1) Cash flow from operations is defined as cash flow from operating
activities before changes in non-cash working capital relating to
operating activities. EBITDA means earnings before interest, taxes,
depreciation and amortization. Readers are advised that cash flow from
operations, cash flow from operations per trust unit and EBITDA do not
have standardized meanings prescribed by GAAP and therefore may not be
comparable with the calculations of similar measures for other
companies. However, Stoneham does compute these measures on a
consistent basis for each reporting period. The reconciliation of cash
flow from operations and EBITDA to a GAAP measure can be found in
Management's Discussion and Analysis (MD&A) for the year ended
December 31, 2009.



OPERATING HIGHLIGHTS

Three months ended Years ended
December 31, % December 31, %
2009 2008 Change 2009 2008 Change
----------------------------------------------------------------------------
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Average number
of rigs (1) 19.0 19.0 0% 19.0 18.8 1%
Rigs at period end
Canada (1) 17 16 6% 17 16 6%
U.S. (1) 2 3 -33% 2 3 -33%

Canada
Operating days (2) 802 1,090 -26% 2,069 3,679 -44%
Stoneham rig
utilization rate (3) 51.3% 74.0% -31% 34.3% 61.1% -44%
CAODC industry
average (3) 31.9% 43.0% -26% 24.8% 41.6% -40%
U.S.
Operating days (2) 83 235 -65% 438 620 -29%
Stoneham rig
utilization rate (3) 45.1% 85.1% -47% 48.5% 84.7% -43%

Total
Operating days (2) 885 1,325 -33% 2,507 4,299 -42%
Stoneham rig
utilization rate (3) 50.6% 75.8% -33% 36.1% 63.6% -43%


(1) In June 2009, Rig 11 was redeployed from Oklahoma to the Bay St. George
Basin in western Newfoundland. Rig 18, which was commissioned in
November 2007 was deployed in February 2008. Rig 17 was commissioned
and deployed in March 2008.
(2) Operating days is the sum of the number of days from spud to rig
release (excluding stand-by, moving, rig-up, and rig-out days) for
rigs active during the period.
(3) Rig utilization rate is based on data reported by the CAODC for rigs in
Canada. Expressed as a percentage, it is calculated by dividing the
number of operating days for a period (as the numerator) by the number
of rigs active during the period multiplied by the number of calendar
days in the period (as the denominator).


Operating days decreased in the fourth quarter of 2009 as a result of lower demand for services. The fourth quarter utilization rate of 50.6% was, however, a significant improvement from the second and third quarter utilization rates of 20% and 25%, respectively. In Canada, Stoneham's rig utilization surpassed the industry average by 61%.

Revenue in the fourth quarter of 2009 declined 51% from prior year to $18.1 million as a result of fewer operating days, lower dayrates, and reduced cost recoverable charges. Revenue per day was $20,498, 27% lower than the $27,978 earned in the fourth quarter of 2008. With a continued weak spot market, dayrates were also negatively impacted by the increased number of rigs competing in the spot market.

As a result of the decline in revenue, cash flow from operations fell 68% to $4.1 million and net earnings and comprehensive income decreased 92% to $0.7 million in the fourth quarter of 2009. Reduced activity levels, lower repairs and maintenance costs and reduced cost recoverable charges caused operating expenses to decrease by 46% and on a per day basis by 19% to $13,485 per day. General and administrative costs were down 12% year over year as result of cost containment measures. Amortization expense was lower mainly due to reduced activity levels. Lower Canadian prime interest rates and lower average debt levels resulted in lower interest expense. Future tax expense increased in the fourth quarter due to an increase in the cumulative temporary differences between the accounting and tax values of property, plant and equipment.

Capital expenditures totaled $0.03 million down from $0.7 million in the fourth quarter of 2008. At the end of the quarter we had $1.0 million of bank indebtedness and outstanding long-term debt of $57.0 million compared to $5.8 million and $70.0 million respectively, at December 31, 2008.

To date in 2010, activity has surpassed that of the first quarter of 2009. In March 2010, Rig 17 was mobilized to the Bakken play in North Dakota on a six month contract. Rig 11 is expected to work in western Newfoundland for the majority of the year. Although the outlook is promising and customer capital expenditure budgets are generally higher than they were in 2009, we remain cautious in our outlook for the balance of 2010. We are concerned about the factors influencing both the demand for and the supply of natural gas and the potential for continued downward pressure on natural gas prices.

With our modern, medium-deep fleet of rigs we are well positioned to complete for work in the unconventional oil and shale gas plays which dictate the use of long reach horizontal drilling and multi zone fracturing. We expect our utilization to continue to be well above the industry average. We anticipate revenue, net income and cash flow from operations to be at least equivalent to that earned in 2009.

DOCUMENTS AVAILABLE ON SEDAR

This news release includes selected financial information relating to the three and twelve month periods ended December 31, 2009 and 2008. This information should be read in conjunction with the consolidated financial statements and the notes thereto of Stoneham Drilling Trust for the years ended December 31, 2009 and 2008 and accompanying management's discussion and analysis. These documents are being filed today with securities regulators and will be available on www.sedar.com and on our website.

ABOUT STONEHAM

Stoneham Drilling Trust is an income trust that provides contract drilling services to oil and natural gas exploration and production companies operating in the Western Canada Sedimentary Basin and select Basins in the U.S., with one rig currently operating onshore in western Newfoundland. With its modern, innovative fleet of drilling rigs, Stoneham is an industry leader in operational performance, safety and rig utilization. Stoneham trades on the TSX under the symbol SDG.UN. Visit our website at www.stonehamdrilling.com.

This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "might" and similar expressions is intended to identify forward-looking information or statements. In particular this news release contains forward-looking information and statements pertaining to the following: (i) utilization of drilling rigs in Canada and the United States; (ii) market pricing for drilling rig services; (iii) timing of a recovery in natural gas prices and (iv) other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. Various assumptions were used in drawing the conclusions or making the forecasts and projections contained in the forward-looking statements throughout this news release.

The forward-looking information and statements contained in this news release reflect several material factors, expectations and assumptions including, without limitation: (i) demand for Stoneham's services by oil and gas exploration and production companies; (ii) capital expenditure programs and other expenditures by oil and gas exploration and production companies; (iii) commodity prices, foreign currency exchange rates and interest rates; (iv) supply and demand for commodities; (v) expectations regarding the Trust's ability to raise capital and to increase the fleet of drilling rigs through acquisitions and construction; (vi) schedules and timing of certain projects and Stoneham's strategy for growth; (vii) Stoneham's future operating and financial results; (viii) treatment under governmental regulatory regimes and tax, environmental and other laws; and (ix) the ability to attract and retain qualified crews for Stoneham's drilling rigs.

The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements including, without limitation: (i) volatility in market prices for commodities; (ii) volatility in exchange rates for the Canadian dollar relative to other world currencies; (iii) liabilities and risks inherent in the drilling industry, including technical problems; (iv) competition for, among other things, capital, the ability to secure manufacturers for drilling rig construction and skilled personnel; (v) changes in general economic, market and business conditions in Canada, North America, and worldwide; (vi) actions by governmental or regulatory authorities including changes in income tax laws; (vii) the ability of Stoneham's customers to maintain cash flow and/or to raise capital and to continue with their drilling programs; (viii) the assumption that customers will continue to honour the terms of their take or pay contracts and/or that amendments may be negotiated to such contracts that would not have a material adverse effect on Stoneham; (ix) the impact of adverse weather on Stoneham's operations; (x) the impact of increased competition and an over-supply of drilling rigs in the industry; (xi) the impact of disasters and accidents such as blow-outs; (xii) the impact of environmental issues, including climate change; and (xiii) the risk of lenders' not renewing current credit facilities.

The Trust cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information and statements contained in this news release speak only as of the date of this news release, and the Trust assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.



Consolidated Balance Sheets

stated in thousands December 31, 2009 December 31, 2008
----------------------------------------------------------------------------

ASSETS

Current
Accounts receivable $ 14,759 $ 30,023
Prepaid expenses 1,085 1,008
----------------------------------------------------------------------------
15,844 31,031

Property, plant and equipment 150,880 157,626
----------------------------------------------------------------------------
$ 166,724 $ 188,657
----------------------------------------------------------------------------
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LIABILITIES

Current
Bank indebtedness $ 1,005 $ 5,790
Accounts payable and accrued liabilities 6,141 10,781
Distributions payable - 401
Current portion of long-term debt 3,563 4,375
----------------------------------------------------------------------------
10,709 21,347

Long-term debt 53,437 65,625
Future income taxes 4,066 3,228
----------------------------------------------------------------------------
68,212 90,200

UNITHOLDERS' EQUITY

Unitholders' capital 89,198 89,198
Accumulated earnings 56,998 56,141
Accumulated distributions to unitholders (47,684) (46,882)
----------------------------------------------------------------------------
98,512 98,457

$ 166,724 $ 188,657
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Consolidated Statements of Earnings,
Comprehensive Income and
Accumulated Earnings


stated in thousands, except Three months ended Twelve months ended
for per trust unit amounts December 31, December 31,
----------------------------------------------------------------------------

2009 2008 2009 2008

REVENUE $ 18,141 $ 37,071 $ 60,023 $ 112,691
----------------------------------------------------------------------------

EXPENSES

Operating 11,934 21,941 41,007 75,565
Amortization 3,257 4,246 8,817 13,345
General and administrative 1,249 1,418 5,480 5,704
Interest on long-term debt 790 896 2,630 4,009
Other interest 10 125 58 343
Gain on disposal of property, plant
and equipment - (292) (113) (194)
----------------------------------------------------------------------------
17,240 28,334 57,879 98,772
----------------------------------------------------------------------------

Earnings before income taxes 901 8,737 2,144 13,919

Income tax expense (recovery):
Current 38 - 38 -
Future 169 (142) 1,249 (1,065)
----------------------------------------------------------------------------
207 (142) 1,287 (1,065)
----------------------------------------------------------------------------

Net earnings and comprehensive
income for the period 694 8,879 857 14,984

Accumulated earnings, beginning of
period 56,304 47,262 56,141 41,157
----------------------------------------------------------------------------

Accumulated earnings, end of period $ 56,998 $ 56,141 $ 56,998 $ 56,141
----------------------------------------------------------------------------
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Earnings per unit
Basic and diluted $ 0.09 $ 1.11 0.11 $ 1.87



Consolidated Statements of Cash Flows

Three months ended Twelve months ended
stated in thousands December 31, December 31,
----------------------------------------------------------------------------

2009 2008 2009 2008

OPERATING ACTIVITIES
Net earnings for the period $ 694 $ 8,879 $ 857 $ 14,984
Adjustment for items not affecting
cash:
Revenue - - (1,256) -
Amortization 3,257 4,246 8,817 13,345
Gain on disposal of property,
plant and equipment - (292) (113) (194)
Future income tax expense
(recovery) 169 (142) 1,249 (1,065)
----------------------------------------------------------------------------
4,120 12,691 9,554 27,070
Changes in non-cash working
capital relating to operating
activities (8,187) (48) 9,939 (5,052)
----------------------------------------------------------------------------
(4,067) 12,643 19,493 22,018
----------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of property, plant and
equipment (27) (701) (338) (8,650)
Proceeds on disposal of property,
plant and equipment 8 799 344 1,302
Changes in non-cash working capital
relating to investing activities 14 (1,935) (511) (5,869)
----------------------------------------------------------------------------
(5) (1,837) (505) (13,217)
----------------------------------------------------------------------------

FINANCING ACTIVITIES
Long-term debt financing - - - 5,500
Long-term debt repayments - (5,000) (13,000) (5,000)
Distributions paid and payable to Trust
unitholders - (2,407) (802) (11,434)
Changes in non-cash working capital
relating to financing activities - (602) (401) (602)
----------------------------------------------------------------------------
- (8,009) (14,203) (11,536)
----------------------------------------------------------------------------

(Decrease) increase in cash (4,072) 2,797 4,785 (2,735)
Cash (bank indebtedness), beginning
of period 3,067 (8,587) (5,790) (3,055)
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Bank indebtedness, end of period $ (1,005) $ (5,790) $ (1,005) $ (5,790)
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The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

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