CanElson Drilling Inc.
TSX VENTURE : CDI

CanElson Drilling Inc.

May 19, 2011 07:00 ET

CanElson Announces First Quarter Financial Results

CALGARY, ALBERTA--(Marketwire - May 19, 2011) - CanElson Drilling Inc. (TSX VENTURE:CDI) -

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

CanElson Drilling Inc. ("CanElson" or the "Corporation") (TSX VENTURE:CDI) announces first quarter financial results in accordance with International Financial Reporting Standards ("IFRSs") with effect from January 1, 2010. The financial results for the three months ended March 31, 2011 and all comparative information has been prepared in accordance with IFRSs.

FIRST QUARTER 2011 HIGHLIGHTS:

  • Services revenue increased from $11.6 million in Q1 2010 to $41.0 million in 2011
  • Q1 2011 EBITDA of $14.4 million increased 831% from Q1 2010 EBITDA of $1,544
  • Q1 2011 Income of $6.6 million increased from $0.3 million during Q1 2010
  • Acquisition of Eagle Drilling Services Ltd. on January 28, 2011 (operated 8 modern ultra-heavy- duty telescoping drilling rigs ("tele-doubles") in south east Saskatchewan) for a total transaction value of approximately $75.4 million
  • Completed an equity financing raising gross proceeds of $40.5 million by the issuance of 9.3 million shares at $4.35 per share
  • Announced expected construction of 5 tele-double drilling rigs at an estimated cost of $40.0 million
  • CanElson utilization of 82% compared to the industry level of approximately 68%
  • Completed construction and deployment of 1 tele-double drilling rig to the recently formed partnership for the west Texas operations

During the first quarter of 2011, services revenue increased 253% to $41.0 million from $11.6 million in the first quarter of 2010. The increase in revenue quarter over quarter was the result of a larger drilling rig fleet and increased revenue rates. The first quarter net income of $6.7 million (basic and diluted: $0.11 per share) increased significantly from first quarter 2010 net income levels of $0.3 million (basic and diluted: 0.01 per share).

President Randy Hawkings states, "The addition of Eagle and the commencement of a five rig construction program continue to position us in the sweet spot of the resource play market. The equity financing has provided us with a strong financial position to take advantage of selected growth opportunities. Presently 100% of our drilling rig fleet is operating in resource plays. CanElson consistently achieves outstanding operational performance through efficient operations, well-trained crews and purpose-built drilling rigs."

Currently the Corporation has contracted and/or received contract advances on 4 of the 5 tele-doubles and anticipates receiving a deposit and/or contract on the fifth tele-double drilling rig prior to its deployment.

At the date of this Press Release, CanElson was operating 27 rigs (All contracted): 18 drilling rigs in the WCSB, 5 (net: 4) drilling rigs in Texas, 2 (net: 1) drilling rigs and 2 (net: 1) service rigs in the Misantla-Tampico Basin of Mexico. The Corporation's owned drilling rig fleet has an average age of less than 3 years.

FINANCIAL HIGHLIGHTS
(tabular amounts are stated in thousands)
Three months ended
March 31,
20112010change
Services revenue$40,954$11,615253%
Rig construction revenue$4,377-nm
EBITDA (i)$14,378$1,544831%
Income attributable to Shareholders of the Corporation$6,565$3072038%
Income per share
Basic$0.11$0.011000%
Diluted$0.11$0.011000%
Funds flow (ii)$12,810$1,484763%
Gross Margin (Services revenue) (iii)$15,840$2,593511%
Gross Profit (rig construction revenue)$788-nm
Weighted average diluted shares outstanding59,81026,901122%

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.

  1. 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 effected by the accounting standards associated with the Corporation's stock based compensation plan.
Three months ended March 31,20112010
Income before finance costs and taxes$9,682$659
Transaction costs1,307-
Depreciation2,903836
Stock based compensation338136
Foreign exchange loss (gain)14842
Gain on disposal of property and equipment-(129)
EBITDA$14,378$1,544
  1. 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.
Three months ended March 31,20112010
Operating cash flow$4,397$(4,244)
Changes in working capital8,4135,728
Funds flow$12,810$1,484
  1. 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.
Three months ended March 31,20112010
Gross profit$12,853$1,753
Depreciation2,903836
Stock based compensation844
Gross margin$15,840$2,593

The full text of the audited financial statements and management's discussion and analysis are to be posted on the SEDAR website at www.sedar.com.

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 (the "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. 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 a strong financial position to take advantage of selected growth opportunities; positive attributes and the view of the drilling rigs as "purpose-built"; and the current expected deployment of the 5 drilling rigs and terms of those contracts. Such forward looking information involves material assumptions and known and unknown risks and uncertainties, certain of which are beyond CanElson's control. Such assumptions, risks and uncertainties include, without limitation, those associated with loss of markets, support from the Corporation's lenders, ability to procure parts for the rig construction program, and/or the lack of qualified personnel. CanElson's actual achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking information will transpire or occur, or occur on such dates, or if any of them do so, what benefits CanElson will derive therefrom. The forward-looking information is made as at the date of this press release and CanElson does not undertake any obligation to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • CanElson Drilling Inc.
    Randy Hawkings
    President & Chief Executive Officer
    (403) 266-3922

    CanElson Drilling Inc.
    Robert Skilnick
    Chief Financial Officer
    (403) 266-3922