Stoneham Drilling Trust
TSX : SDG.UN

Stoneham Drilling Trust

November 09, 2009 09:00 ET

Stoneham Drilling Trust (TSX:SDG.UN) Announces Financial Results for the Third Quarter Ended September 30, 2009

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2009) -

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) announces reduced revenue, operating margins and rig utilization due to depressed industry conditions.



FINANCIAL HIGHLIGHTS

Three months ended Nine months ended
September 30, September 30,
(000s except for 2009 2008 Change 2009 2008 Change
per trust unit amounts) $ $ $ $

Revenue 8,616 30,803 -72% 41,882 75,620 -45%
Net earnings (loss) (2,095) 3,805 -155% 163 6,105 -97%
Per trust unit (basic and
diluted) (0.26) 0.47 -155% 0.02 0.76 -97%
Cash flow from operations (1) (889) 7,566 -112% 5,434 14,379 -62%
Per trust unit (basic and
diluted) (0.11) 0.94 -112% 0.68 1.79 -62%
Cash flow from operating
actvities 568 (4,777) 112% 23,560 9,375 151%
Per trust unit (basic and
diluted) 0.07 (0.60) 112% 2.94 1.17 151%
EBITDA (1) (171) 8,668 -102% 8,578 17,710 -52%

Distributions paid and
payable - 3,009 -100% - 9,027 -100%
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 three and nine month periods
ended September 30, 2009.


OPERATING HIGHLIGHTS

Three months ended Nine months ended
September 30, September 30,
2009 2008 Change 2009 2008 Change

Average number of rigs (1) 19.0 19.0 - 19.0 18.7 2%
Rigs at period end
Canada 17 16 6% 17 16 6%
U.S. 2 3 -33% 2 3 -33%

Canada
Operating days (2) 356 1,044 -66% 1,267 2,589 -51%
Stoneham utilization
rate (3) 22.8% 70.9% -68% 28.4% 56.9% -50%
CAODC industry average
(3) 20.6% 48.0% -57% 22.4% 41.1% -45%
U.S.
Operating days (2) 83 204 -59% 355 385 -8%
Stoneham rig
utilization rate 45.0% 81.3% -45% 49.3% 84.5% -42%
Total
Operating days (2) 439 1,248 -65% 1,622 2,974 -45%
Stoneham utilization
rate 25.1% 71.4% -65% 31.3% 59.4% -47%

(1) Rig 18, completed in November 2007, was deployed in February 2008. Rig
17 was completed 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. 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).


In Canada, Stoneham's rig utilization for the quarter was down 68% from the corresponding period in 2008. The significant reduction in operating days is the result of depressed industry conditions and lower demand for contract drilling services as oil and gas producers continue to scale back exploration and development spending in response to weak natural gas prices. However, Stoneham continued to outperform the Canadian industry, as our utilization rate was 10% higher than the industry average. In the U.S. operating days declined 59% as a result of contract expirations during the year and the redeployment of Rig 11 to Canada.

Revenue in the third quarter of 2009 declined 72% to $8.6 million due to fewer operating days, lower dayrates and reduced cost recoverable charges. The expiration of ten long-term contracts in 2009 and a lack of work for the remaining rigs under contract resulted in a greater number of rigs operating at weaker spot market rates, as compared to the prior comparative quarter. Stoneham continues to have five rigs in Canada under contract, which expire in 2010 and 2011.

Cash flow from operations fell by $8.5 million to ($0.9) million while net earnings (loss) fell by $5.9 million to ($2.1) million relative to the third quarter of 2008 as the revenues generated were not sufficient to cover operating, general and administrative and interest charges. Operating expenses as a proportion of revenue were higher in the quarter due to the greater impact of fixed costs, reduced activity levels, and increased repair charges arising from preparing certain rigs to become operational late in the third quarter and early in the fourth quarter. Interest on long-term debt for the quarter decreased due to a reduction in the Canadian prime interest rate and principal payments made during the first half of 2009. At the end of the quarter, we had $3.1 million of cash and outstanding long-term bank debt was $57.0 million.

We continue to expect reduced rig utilization for the fourth quarter of 2009, as compared to 2008. Although a seasonal increase in activity in the fourth quarter is anticipated, the recessionary environment will continue to keep dayrates depressed for the near term.

DOCUMENTS AVAILABLE ON SEDAR

This news release includes selected financial information relating to the three and nine month periods ended September 30, 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 three and nine month periods ended September 30, 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 in the Anadarko Basin in the U.S., with one rig currently operating onshore in the Bay St. George Basin of 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, 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; (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

Unaudited - stated in thousands

September 30, December 31,
2009 2008
----------------------------------------------------------------------------

ASSETS

Current
Cash $ 3,067 $ -
Accounts receivable 6,284 30,023
Prepaid expenses 799 1,008
----------------------------------------------------------------------------
10,150 31,031

Property, plant and equipment 154,118 157,626
----------------------------------------------------------------------------
$ 164,268 $ 188,657
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES

Current
Bank indebtedness $ - $ 5,790
Accounts payable and accrued liabilities 5,362 10,781
Distributions payable - 401
Current portion of long-term debt - 4,375
----------------------------------------------------------------------------
5,362 21,347

Long-term debt 57,000 65,625
Future income taxes 4,088 3,228
----------------------------------------------------------------------------
66,450 90,200

UNITHOLDERS' EQUITY

Unitholders' capital 89,198 89,198
Accumulated earnings 56,304 56,141
Accumulated distributions to unitholders (47,684) (46,882)
----------------------------------------------------------------------------
97,818 98,457

$ 164,268 $ 188,657
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------------------------------

2009 2008 2009 2008

REVENUE $ 8,616 $ 30,803 $ 41,882 $ 75,620
----------------------------------------------------------------------------

EXPENSES

Operating 7,485 20,525 29,073 53,624
Amortization 1,666 3,798 5,560 9,197
General and administrative 1,302 1,610 4,231 4,286
Interest on long-term debt 716 1,003 1,840 3,113
Other interest 2 99 48 218
Gain on disposal of property,
plant and equipment - - (113) -
----------------------------------------------------------------------------
11,171 27,035 40,639 70,438
----------------------------------------------------------------------------

Earnings (loss) before income taxes (2,555) 3,768 1,243 5,182
Future income tax expense (recovery) (460) (37) 1,080 (923)
----------------------------------------------------------------------------

Net earnings (loss) and
comprehensive income (loss) for
the period (2,095) 3,805 163 6,105

Accumulated earnings, beginning of
period 58,399 43,457 56,141 41,157
----------------------------------------------------------------------------

Accumulated earnings, end of period $ 56,304 $ 47,262 $ 56,304 $ 47,262
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings (loss) per unit
Basic and diluted $ (0.26) $ 0.47 $ 0.02 $ 0.76
----------------------------------------------------------------------------


Consolidated Statements of Cash Flows
Unaudited - stated in thousands

Three months ended Nine months ended
September 30, September 30,
----------------------------------------------------------------------------

2009 2008 2009 2008

OPERATING ACTIVITIES
Net earnings (loss) for the period $ (2,095) $ 3,805 $ 163 $ 6,105
Adjustment for items not affecting
cash:
Revenue - - (1,256) -
Amortization 1,666 3,798 5,560 9,197
Gain on disposal of property, plant
and equipment - - (113) -
Future income tax expense
(recovery) (460) (37) 1,080 (923)
----------------------------------------------------------------------------
(889) 7,566 5,434 14,379
Change in non-cash working capital
relating to operating activities 1,457 (12,343) 18,126 (5,004)
----------------------------------------------------------------------------
568 (4,777) 23,560 9,375
----------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of property, plant and
equipment (34) (891) (311) (7,446)
Proceeds on disposal of property,
plant and equipment 33 - 336 -
Change in non-cash working capital
relating to investing activities 6 (21) (525) (3,934)
----------------------------------------------------------------------------
5 (912) (500) (11,380)
----------------------------------------------------------------------------

FINANCING ACTIVITIES
Long-term debt repayments - - (13,000) -
Long-term debt financing - 3,800 - 5,500
Distributions paid and payable to
Trust unitholders - (3,009) (802) (9,027)
Change in non-cash working capital
relating to financing activities - - (401) -
----------------------------------------------------------------------------
- 791 (14,203) (3,527)
----------------------------------------------------------------------------

Increase (decrease) in cash 573 (4,898) 8,857 (5,532)
Cash (bank indebtedness), beginning
of period 2,494 (3,689) (5,790) (3,055)
----------------------------------------------------------------------------

Cash (bank indebtedness), end of
period $ 3,067 $ (8,587) $ 3,067 $ (8,587)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

Contact Information