Xtreme Drilling and Coil Services

Xtreme Drilling and Coil Services

May 07, 2013 19:36 ET

Leading Edge Technology Plus Operational Efficiencies Result in Record Quarterly Revenue and EBITDA for Xtreme Drilling and Coil Services

CALGARY, ALBERTA--(Marketwired - May 7, 2013) - Xtreme Drilling and Coil Services (TSX:XDC) ("Xtreme" or the "Company") announces summary results for the three months ended March 31, 2013. It is anticipated that filing will take place on SEDAR of the interim Condensed Consolidated Financial Statements and Management's Discussion and Analysis by Friday, May 10, 2013.

Xtreme has scheduled a conference call on Wednesday, May 8, 2013, beginning promptly at 9:00 am MDT (10:00 am CDT; 11:00 am EDT) to discuss the 2013 first quarter financial and operating results. Tom Wood, Chief Executive Officer, will host the conference call with participation from Matt Porter, Chief Financial Officer.

Conference operator dial‐in numbers

To participate in the conference call, please dial in as follows approximately ten minutes before the start time in your time zone.

+1 800-769-8320 (North America Toll‐Free) or +1 416‐695-6616 (Alternate)

An audio replay of the call will be available until Friday, May 17, 2013. To access the replay, call +1 905‐694‐9451 or +1 800‐408‐3053 and enter pass code 8732293.

Highlights - Q1 2013

  • Record adjusted EBITDA of $19.2 million, less the amount attributable to non-controlling interest of $0.6 million, resulted in adjusted EBITDA attributable to Xtreme of $18.6 million. This is an increase of 25% over the previous quarter and 147% over the first quarter of 2012. The 35.4% adjusted EBITDA margin is the highest quarterly margin the Company has ever achieved. The record quarter was driven by improved margins in the US Drilling and Coil Services segments. Both recognized an increase in operating margin due to slightly higher utilization and increased operational efficiencies.
  • Record revenue of $54.2 million in the first quarter of 2013, an increase of 4% over the previous quarter and 41% over the first quarter of 2012. The increase in revenue for the quarter was a function of 3% more operating days and an increase in average revenue per day to $27,800 from $27,400 in the fourth quarter of 2012.
  • The Company had 1,949 operating days or 58 more days in the first quarter of 2013 than the fourth quarter of 2012. This resulted in a utilization rate of 80% for the fleet of 21 XDR drilling rigs and 7 XSR coiled tubing units.
  • The Drilling Segment achieved utilization of 89% on 1,683 operating days. This is comprised of a 93% utilization rate in the US XDR fleet and 68% for the Canadian XDR rigs. For the quarter, the coil services segment achieved utilization of 49% on 265 operating days. This is comprised of a 99% utilization rate on the two XSR units in Saudi Arabia and a 24% utilization rate on the four available XSR units in the US. During the quarter the Company actively marketed only two of the four available XSR units. The two operating XSR units in the US continue to increase activity as March represented the highest ever utilization of 73%. Due to the increased activity levels, additional crews are currently being trained and it is anticipated that a third XSR unit will begin work within the next 30 days in South Texas.
  • Net Income of $4.3 million, less amount attributable to non-controlling interest of $0.4 milion, for net income attributable to Xtreme of $3.9 million for the first quarter of 2013, or $.05 per fully diluted share. This is net of a foreign exchange loss of $1.9 million during the quarter. Excluding this charge net income would have been approximately $6.2 million or $.08 per share.
  • The Company paid down $5 million on the $10 million HSBC demand note issued in 2012. Net debt at quarter end was $130 million compared to $142 million the previous quarter. Subsequent to quarter end, the Company paid the remaining $5 million on the HSBC demand note. Xtreme exited the quarter with a funded debt to EBITDA ratio of 2.76, which is well under the bank covenant level of 3.25. Capital expenditures totaled $3.5 million for the first quarter. Currently, the Company anticipates full year 2013 maintenance capital expenditures to be between $15 and $17 million.
  • Based on the criteria outlined in IFRS 10, the Company has concluded that it has control over Xtreme Equipment Group S.A. and Xtreme Coil Drilling Saudi Arabia Ltd. and these entities should be fully consolidated. The Company's 80% ownership interest in each of these two entities was previously accounted for as joint ventures using the proportionate consolidation method of accounting.
Xtreme Drilling and Coil Services Corp.
Selected Quarterly Financial Information (unaudited)
Three months ended Mar 31, 2013 Dec 31, 2012 Sep 30, 2012 Jun 30, 2012
Revenue 54,182 51,852 48,910 40,180
Adjusted EBITDA 1 18,627 14,876 10,259 7,168
Adjusted EBITDA as a percentage of Revenue 34 29 21 18
Adjusted EBITDA per share 1 - basic ($) 0.23 0.18 0.16 0.11
Net income (loss) 4,343 4,888 (3,457 ) (2,192 )
Net income (loss) per share - basic ($) 0.05 0.06 (0.06 ) (0.04 )
Capital assets 417,431 415,354 425,364 425,397
Total assets 508,756 506,485 511,214 512,186
Net debt 2 130,014 141,841 119,759 144,039
Operating days 1 1,949 1,891 1,742 1,494
Utilization (percentage) - XDR 89 85 86 74
Utilization (percentage)- XSR 49 47 36 57
Utilization (percentage) - Total 80 77 74 70
Weighted average rigs in service 28.0 26.8 26.0 23.4
Total rigs, end of quarter 28 28 28 27
Mar 31, 2012 Dec 31, 2011 Sep 30, 2011 Jun 30, 2011
Revenue 38,446 32,552 26,659 25,500
Adjusted EBITDA 1 7,536 6,144 5,515 6,039
Adjusted EBITDA as a percentage of Revenue 20 20 22 25
Adjusted EBITDA per share 1 - basic ($) 0.11 0.09 0.08 0.10
Net (loss) income 1,207 (1,025 ) (305 ) 1,714
Net (loss) income per share - basic ($) 0.02 (0.02 ) (0.00 ) 0.03
Capital assets 379,710 348,148 308,465 261,357
Total assets 464,386 424,853 385,335 330,332
Net debt 2 109,546 75,563 35,102 3,590
Operating days 1 1,423 1,246 1,137 1,165
Utilization (percentage) - XDR 84 73 69 77
Utilization (percentage)- XSR 56 97 100 98
Utilization (percentage) - Total 79 75 73 80
Weighted average rigs in service 19.8 18.0 17.0 16.0
Total rigs, end of quarter 18 18 17 16
1 Adjusted EBITDA attributable to the owners of the parent. See Non-GAAP measures
2 Total debt less cash

Excerpt from Management's Discussion and Analysis

For the three months ended March 31, 2013


The focus on execution and optimization continued at Xtreme during the first quarter of 2013. The Company improved financial performance to maintain the momentum of the previous three quarters. Both revenue and adjusted EBITDA reached all-time quarterly highs. Management is confident that the foundation has been laid over the past nine months that will allow the Company to produce consistent financial and operating results well into the future.

While the US rig count has recently moderated or even slightly decreased, Xtreme has not felt the effects. At quarter end the Company had six rigs operating in the Williston Basin, ten rigs operating in the greater DJ Basin, and one rig operating in Utah. The two primary US plays of the Bakken and the Niobrara have remained strong. The successful drilling programs of several operators in the Wattenberg/Niobrara field of Colorado have led to increased demand for drilling. This has shown up in the rig count, which has increased from 30 operating rigs at the end of the first quarter 2012 to 51 operating rigs at the end of the first quarter 2013. Xtreme has participated in this growth as four additional XDR 500 rigs were contracted in the Niobrara over the past year. These new contracts increased Xtreme's market share to 20% in this growing play.

In South Texas, Xtreme operates two XSR coiled tubing units in the Eagle Ford play. Drilling activity has remained robust with approximately 200 drilling rigs operating. Although the Company does not drill in the Eagle Ford the rig count is typically a good proxy for completion demand. Since the XSR division was reorganized in the third quarter of 2012, Xtreme has been able to consistently improve operating performance. Utilization levels and operating margins have increased in each of the past three quarters. This business continues to deliver excellent operational results for customers and has built a reputation as the long reach coil provider of choice in the Eagle Ford.

Drilling Segment - XDR

Xtreme ended the quarter with 21 XDR rigs available to work. Of these rigs 17 of 18 were under long term contracts in the United States and 1 of 3 rigs was working well-to-well in Canada. At quarter end the Company had approximately 4,650 days on term contract for the remainder of 2013 and an additional 3,900 days contracted beyond 2013. The average remaining duration on the contracted rig fleet was approximately 1.25 years at quarter end. Two XDR 500 rigs and one XDR 400 rig are up for renewal in the second half of the year in the Bakken. Discussions with existing customers are currently taking place and it is anticipated at this time that each of these rigs will remain in the Williston Basin.

Drilling services continued to be the largest revenue segment in the Company. Canadian and US drilling operations represented 82%, or $43.3 million, of revenue for the first quarter. Margin improvement continued as operating margin increased to 41.7% of revenue or $18.1 million. This was driven by new processes that were implemented over the previous nine months with the objective of improving the overall cost structure of the drilling division.

Canada continues to be slow evidenced by the fact that horizontal well permits were down 10% year-over-year, as was the rig count. In the quarter, the Company had 179 operating days in Canada compared to 174 in the fourth quarter of 2012. The Company had one rig work into break up. It is anticipated that the three XDR rigs located in Canada will begin work when road bans come off in June.

Coil Service Segment - XSR

The US XSR division began to hit its stride during the latter half of the first quarter. March was a record month both on revenue and operating margin. The current work backlog has given management the confidence to begin the process of deploying the third unit to the Eagle Ford. It is anticipated that the unit will be operating by mid-June.

For the first quarter, operating days were 86 which was up from 84 in the previous period. During the quarter the XSR division completed 39 jobs and since inception has performed 164 jobs. Over the course of these wells Xtreme has never left any coiled tubing in the well. This is an unprecedented operational record. In addition, the Company has now completed wells to 20,344 feet of total measured depth and 10,240 feet of total lateral length with 2 5/8 inch coiled tubing.

In Saudi Arabia the strong performance continued in the first quarter. Operating margins improved on very strong utilization of 99%. The Company is still waiting to hear the final results on the extension of the two units in Saudi. They will complete the existing contract in July and August respectively. The new contract has been bid and it is expected that an announcement is imminent.

Reader Advisory

This news release, or documents incorporated herein, contains forward-looking statements ("FLS"). More particularly, this news release contains statements that may relate to contracting, marketing, financing, construction, modifications, deployment, operation, utilization of drilling rigs in the Company's current and future fleet, and any potential outcome relating to claims and litigation. Further, the FLS herein may relate to trade credit insurance carried by the Company to mitigate receivables collection risk. Although Xtreme believes expectations reflected in these FLS are reasonable, readers should not place undue reliance on them because Xtreme can give no assurance they will prove to be correct. There are many factors that could cause FLS not to be correct, including risks and uncertainties inherent in the Company's business.

These statements are based on certain factors and assumptions including, but not limited to: the assessment of current and projected future operations; ongoing and future strategic business alliances, negotiations and opportunities to enter new, extend or complete existing contracts; the availability and cost of financing; foreign currency exchange rates; timing and magnitude of capital expenditures; expenses and other variables affecting rig operation, modification and construction; the ability and commitment of vendors to provide rig component equipment, services and supplies, including labor, in a cost-effective and timely manner; the issuance of applied-for patents; changes in tax rates; and government regulations. Although Xtreme considers the assumptions used to prepare this news release reasonable, based on information available to management as of May 7, 2013, ultimately the assumptions may prove to be incorrect.

Forward-looking statements are also subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from management's current expectations. These factors include, but are not limited to: the cyclical nature of drilling market demand, foreign currency exchange rates, and commodity prices; access to credit and to equity markets; the availability of qualified personnel; vendor-provided rig components; and, competition for customers.

Management's assumptions considered the following: compliance with the terms of the Company's current and proposed new credit facility; ongoing access to key supplies and components required to continue operating and maintaining equipment, including fuel; continued successful performance of drilling and related equipment; expectations regarding gross margin; recruitment and retention of qualified personnel; continuation or extension of existing long-term or multi-well contracts; revenue expectations related to shorter-term drilling opportunities; willingness and ability of customers to remit amounts owing to Xtreme in accordance with normal industry practices; and management of accounts receivable in direct relation to revenue generation.

In preparing this news release, management considered the following risk factors: fluctuations in crude oil and natural gas prices, supply and demand; fluctuation in foreign currency exchange and interest rates; financial stability of Xtreme's customers; current and future applications for Xtreme's proprietary technology; competition from other drilling contractors; regulatory and economic conditions in regions where Xtreme operates; environmental constraints; changes to government legislation; international trade barriers or restrictions; and, where appropriate, global political and military events.

Financial outlook information contained in this news release about prospective results of operations, financial position or cash provided by operating activities is based on assumptions about future events, including economic conditions and proposed courses of action, and on management's assessment of relevant information currently available. Readers are cautioned such financial outlook information contained in this news release is not appropriate for purposes other than for which it is disclosed here. Readers should not place undue importance on FLS and should not rely on this information as of any other date. Except as required pursuant to applicable securities laws, Xtreme disclaims any intention, and assumes no obligation, to update publicly or revise FLS to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such FLS or otherwise.

About Xtreme Drilling and Coil Services

Xtreme Drilling and Coil Services Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification drilling rigs and coiled tubing well service units featuring leading-edge proprietary technology including AC high capacity coil injectors, deep re-entry drilling capability, modular transportation systems and continuous integration of in-house advances in methodologies.

Currently Xtreme operates two service lines: Drilling Services and Coil Services under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada, the United States and Saudi Arabia. For more information about the Company, please visit www.xtremecoil.com.

Xtreme Drilling and Coil Services Corp.
Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
Mar 31, 2013 Dec 31, 2012 Jan 1, 2012
Current assets
Cash and cash equivalents 13,887 5,921 6,873
Accounts receivable 47,544 44,878 46,653
Other receivables 2,972 2,909 1,568
Prepaid expenses and other 1,423 2,047 2,114
Assets held for sale - 9,308 -
Income tax recoverable 324 368 928
Inventory 7,202 6,474 6,470
73,352 71,905 64,606
Non-current assets
Deferred tax asset 13,829 15,006 7,576
Property and equipment 417,431 415,354 348,148
Intangible assets 4,144 4,220 4,523
Total Assets 508,756 506,485 424,853
Liabilities and Equity
Current liabilities
Bank indebtedness 6,441 7,834 -
Accounts payable and accrued liabilities 21,779 27,905 26,901
Current portion of long-term debt 15,473 14,201 500
43,693 49,940 27,401
Long-term liabilities
Long-term debt 121,987 125,727 81,936
Total Liabilities 165,680 175,667 109,337
Equity attributable to owners of the parent
Share capital 327,184 327,197 310,296
Share option reserve 11,792 11,572 10,338
Accumulated deficit (1,394 ) (5,299 ) (4,316 )
Foreign currency translation reserve (5,427 ) (12,879 ) (8,596 )
332,155 320,591 307,722
Non-controlling interest 10,921 10,227 7,794
343,076 330,818 315,516
Total Liabilities and Equity 508,756 506,485 424,853
Xtreme Drilling and Coil Services Corp.
Condensed Consolidated Statements of Income
For the three months ended March 31, 2013 and 2012
(in thousands of Canadian dollars, except share and per share data)
2013 2012
Revenue 54,182 38,446
Operating expenses 32,397 27,334
General and administrative expenses 2,551 3,203
Depreciation of property and equipment 8,543 4,967
Amortization of intangibles 76 76
Stock-based compensation 220 509
Foreign exchange loss (gain) 1,873 (1,608 )
Loss on sale of equipment 148 12
Other expense 36 42
Interest expense 2,119 1,481
Income before tax for the period 6,219 2,430
Tax expense
Current 656 490
Deferred 1,220 733
Total tax expense 1,876 1,223
Net income for the period 4,343 1,207
Net income attributable to:
Owners of the parent 3,905 932
Non-controlling interest 438 275
4,343 1,207
Net income per common share attributable to equity owners of the parent
- basic 0.05 0.01
- diluted 0.05 0.01
Weighted average number of common shares
- basic 80,790,315 65,702,914
- diluted 80,981,993 66,057,529
Xtreme Drilling and Coil Services Corp.
Reconciliation of Adjusted EBITDA
For the three months ended March 31, 2013 and 2012
(in thousands of Canadian dollars, except per share data)
Mar 31, 2013 Mar 31, 2012
Net income 4,343 1,207
Tax expense 1,876 1,223
Interest expense 2,119 1,481
Other expense 36 42
Loss on sale of equipment 148 12
Foreign exchange loss (gain) 1,873 (1,608 )
Stock-based compensation 220 509
Amortization of intangibles 76 76
Depreciation of property and equipment 8,543 4,967
Adjusted EBITDA 19,234 7,909
Adjusted EBITDA per share ($) 0.24 0.12
Adjusted EBITDA attributable to:
Owners of the parent 18,627 7,536
Non-controlling interest 607 373
19,234 7,909

Contact Information

  • Xtreme Drilling and Coil Services Corp.
    Matt Porter
    Chief Financial Officer
    +1 281 994 4604

    Xtreme Drilling and Coil Services Corp.
    16285 Park Ten Place, Suite 650
    Houston, TX 77084