Stoneham Drilling Trust

Stoneham Drilling Trust

May 01, 2008 09:00 ET

Stoneham Drilling Trust (TSX:SDG.UN) Announces Financial Results for the First Quarter Ended March 31, 2008

CALGARY, ALBERTA--(Marketwire - May 1, 2008) -


Stoneham Drilling Trust ("Stoneham" or the "Trust") (TSX:SDG.UN) announces improved results in the first quarter, benefitting from increased capacity with the completion of the rig construction program and a rig utilization rate that significantly exceeded the industry average.


Three months ended March 31,
(000s except for per trust unit
amounts) 2008 2007 Change
-------------------------------- ------- ------- ---------
$ $ %

Revenue 31,641 18,963 67%
Net earnings 4,575 4,345 5%
Per trust unit (basic and diluted) 0.57 0.54 5%
Cash flow from operations (1) 8,693 6,195 40%
Per trust unit (basic and diluted) 1.08 0.77 40%
EBITDA (1) 9,880 6,597 50%

Distributions paid and payable 3,009 3,610 -17%
Units outstanding (weighted average
and diluted) 8,023 8,023 0%

Operating Highlights
Average number of rigs (2) 17.5 12.5 40%
Rigs at quarter end
Canada 17 13 31%
U.S 2 - -

Operating days (3) 1,217 805 51%
Stoneham utilization rate (4) 77.1% 72.0% 7%
CAODC industry average (4) 55.9% 58.8% -5%

Operating days (3) 26 - -

(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 operating activities and EBITDA to a GAAP measure can be
found in Management's Discussion and Analysis (MD&A) for the three
month period ended March 31, 2008.
(2) Rig 18, which was completed in November 2007 was deployed in February
2008. Rig 17 was completed in the first quarter of 2008 and deployed in
March. In 2007, Rig 15 was deployed in February, Rig 12 was deployed in
July, Rigs 16 and 19 were deployed in October, and Rig 20 was deployed
in December.
(3) 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.
(4) Rig utilization rate, expressed as a percentage, is based on data
reported by the Canadian Association of Oilwell Drilling Contractors
(CAODC). 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

Revenue in the first quarter of 2008 increased 67% to $31.6 million due to increased capacity resulting from the addition of five new drilling rigs during 2007, better rig utilization in Canada, and an increase in cost recoverable charges. Rigs 17 and 18, which were deployed to the U.S. during the first quarter of 2008, contributed $1.9 million in revenue. Higher day rates associated with the newer rigs were mainly offset by lower day rates associated with a higher percentage of spot market activity year over year. Cash flow from operations increased 40% to $8.7 million as a result of the increase in revenue, offset in part by higher interest expense arising from higher debt levels due to the rig construction program and slightly lower operating margins. Net earnings increased 5% to $4.6 million as higher cash flow from operations was largely offset by higher amortization costs resulting from additional operating days and a higher cost base and a future income tax charge of $0.7 million in the quarter.

The deployment of additional rigs resulted in a 54% increase in our total operating days to 1,243 from 805 days in the first quarter of 2007. The increase in operating days can also be attributed to a slight improvement in rig utilization resulting from higher demand for contract drilling services due to strengthening natural gas prices and an increase in our customer base year over year. In Canada, Stoneham's rig utilization for the quarter was up 7% from the corresponding period in 2007. Stoneham continues to outperform the Canadian industry average with a first quarter utilization rate that was 38% higher than the industry average (22% higher in the first quarter of 2007).

During the first quarter, capital expenditures totaled $4.7 million. The expenditures mainly related to the completion of the rig construction program and our new operations centre in Leduc. The operations centre became operational on March 31. At the end of the quarter, bank indebtedness was $5.1 million and outstanding long-term debt was $69.5 million including a current portion of $1.4 million. During the quarter, bank indebtedness increased by $2.0 million to assist in funding completion of the rig construction program and Leduc operations facility.

Distributions paid and payable during the first quarter of 2008 totalled $3.0 million, down $0.6 million from the first quarter last year. Monthly distributions during the first quarter of 2008 were consistent with the fourth quarter of 2007, at $0.125 per trust unit, but were slightly lower than monthly distributions for the first quarter of 2007, of $0.150 per trust unit.

Continued volatility in natural gas prices, a strong Canadian dollar, and uncertainty regarding the Alberta royalty regime have led to conservative drilling budgets for 2008. During the first quarter, natural gas prices strengthened considerably; however, overall Canadian drilling activity remained at a slightly slower pace than last year. Activity levels to date in the second quarter have been higher than the same period in 2007 and, provided that most rigs are able to return to work in early to mid June, we expect our Canadian rig utilization in the second quarter to be higher than last year. As well, this activity will be augmented by activity from our two rigs operating in the U.S.


This news release includes selected financial information relating to the three month periods ended March 31, 2008 and 2007. This information should be read in conjunction with the consolidated financial statements and the notes thereto of Stoneham Drilling Trust for the three month periods ended March 31, 2008 and 2007 and accompanying management's discussion and analysis. These documents are being filed today with securities regulators and will be available on and on our website.


Stoneham Drilling Trust is an income trust that provides contract drilling services to oil and natural gas exploration and production companies operating in western Canada and the Anadarko Basin of Oklahoma. 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. The Trust pays monthly cash distributions to unitholders. Visit our website at

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, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: (i) utilization of drilling rigs in Canada and the United States; and (ii) 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 development; (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 to crew 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) increases and overruns in drilling rig construction costs; (xi) the impact of increased competition and an over-supply of drilling rigs in the industry; (xii) the impact of disasters and accidents such as blow-outs; and (xiii) the impact of environmental issues, including climate change.

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
Unaudited - stated in thousands

March 31, December 31,
2008 2007


Accounts receivable $ 27,414 $ 22,023
Prepaid expenses 1,025 890
28,439 22,913

Property, plant and equipment 164,730 163,438

$ 193,169 $ 186,351


Bank indebtedness $ 5,096 $ 3,055
Accounts payable and accrued liabilities 16,144 13,649
Distributions payable 1,003 1,003
Current portion of long-term debt 1,448 -
23,691 17,707

Long-term debt 68,052 69,500
Future income taxes 4,954 4,238
96,697 91,445


Unitholders' capital 89,198 89,198
Accumulated earnings 45,732 41,157
Accumulated distributions to unitholders (38,458) (35,449)
96,472 94,906

$ 193,169 $ 186,351

Consolidated Statements of Earnings, Comprehensive Income, and Accumulated
Unaudited - stated in thousands, except for per trust unit amounts

Three months ended March 31,
2008 2007

REVENUE $ 31,641 $ 18,963

Operating 20,437 11,061
Amortization 3,402 1,850
General and administrative 1,324 1,305
Interest on long-term debt 1,120 330
Other interest 67 72
26,350 14,618

Earnings before income taxes 5,291 4,345
Future income tax expense 716 -

Net earnings and comprehensive income for
the period 4,575 4,345

Accumulated earnings, beginning of period 41,157 35,161

Accumulated earnings, end of period $ 45,732 $ 39,506

Earnings per unit
Basic and diluted $ 0.57 $ 0.54

Consolidated Statements of Cash Flows
Unaudited - stated in thousands

Three months ended March 31,
2008 2007

Net earnings for the period $ 4,575 $ 4,345
Adjustment for items not affecting cash:
Amortization 3,402 1,850
Future income tax expense 716 -
8,693 6,195

Changes in non-cash working capital
relating to operating activities (2,749) 2,451
5,944 8,646

Purchase of property, plant and
equipment (4,694) (18,743)
Changes in accounts payable relating
to investing activities (282) (1,701)
(4,976) (20,444)

Long-term debt financing - 15,000
Distributions paid and payable to
Trust unitholders (3,009) (3,610)
(3,009) 11,390

Decrease in cash and cash equivalents (2,041) (408)
Bank indebtedness, beginning of period (3,055) (3,295)

Bank indebtedness, end of period $ (5,096) $ (3,703)

The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.

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