Stoneham Drilling Trust

Stoneham Drilling Trust

May 14, 2009 08:00 ET

Stoneham Drilling Trust (TSX:SDG.UN) Announces Financial Results for the First Quarter Ended March 31, 2009

CALGARY, ALBERTA--(Marketwire - May 14, 2009) -


Stoneham Drilling Trust ("Stoneham" or the "Trust") (TSX:SDG.UN) announces decreased revenue and net earnings as reduced global demand for energy continued to depress oil and natural gas prices, resulting in reduced demand for our services.


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

Revenue 24,188 31,641 -24%
Net earnings 2,445 4,575 -47%
Per trust unit (basic and diluted) 0.30 0.57 -47%
Cash flow from operations (1) 6,790 8,693 -22%
Per trust unit (basic and diluted) 0.85 1.08 -22%
Cash flow from operating activities 8,931 5,944 50%
Per trust unit (basic and diluted) 1.11 0.74 50%
EBITDA (1) 7,472 9,880 -24%

Distributions paid and payable 802 3,009 -73%
Units outstanding (weighted average
and diluted) 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 month period ended March
31, 2009.


Three months ended March 31, %
2009 2008 Change
Average number of rigs (1) 19.0 17.5 9%
Rigs at period end
Canada 16 17 -6%
U.S. 3 2 50%

Operating days (2) 646 1,217 -47%
Stoneham rig utilization rate (3) 44.9% 77.1% -42%
CAODC industry average (3) 36.1% 55.9% -35%
Operating days (2) 189 26 627%
Stoneham rig utilization rate (3) 70.0% 83.9% -17%

Operating days (2) 835 1,243 -33%
Stoneham rig utilization rate (3) 48.8% 75.7% -36%

(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, expressed as a percentage, 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 42% from the corresponding period in 2008. The reduction in operating days is the result of reduced demand for contract drilling services as most exploration and production (E&P) companies have reduced their drilling programs, due to low commodity prices and restricted access to both capital markets and credit. However, Stoneham continued to outperform the Canadian industry average by 24% with Canadian rig utilization of 44.9%. In the U.S. the full quarter inclusion of Rigs 11, 17 and 18 resulted in an increase in activity. We expect reduced operating days in the U.S. for the remainder of the year as only one rig remains under contract.

Revenue in the first quarter of 2009 decreased 24% to $24.2 million mainly due to the 33% decrease in total operating days, offset by a slight increase in dayrates year-over-year, (mainly associated with the industry crew wage increase effective October 1, 2008) and higher operating days in the U.S. Revenue in the U.S. totaled $7.6 million, compared to $1.9 million in the same period in 2008.

Cash flow from operations decreased 22% to $6.8 million relative to the first quarter of 2008. The decline in revenue was offset in part by a similar reduction in operating expenses resulting from lower activity levels as well as a reduction in interest expense due to the reduction in the Canadian prime interest rate.

Net earnings decreased 47% to $2.4 million. Earnings before income taxes decreased in line with cash flow from operations as amortization also declined in tandem with the reduction in activity. Future income taxes however rose from $0.7 million in 2008 to $1.8 million in 2009 causing the higher percentage decline in net earnings.

At the end of the quarter, bank indebtedness was $1.4 million and outstanding long-term bank debt was $67.0 million including a current portion of $8.4 million. During the quarter, $3.0 million was repaid on the long-term debt facility.

Distributions paid during the first quarter of 2009 totaled $0.8 million, down from $3.0 million during the first quarter of 2008. On March 4, 2009, we announced the indefinite suspension of cash distributions to allow us to better manage and maintain flexibility with our balance sheet until industry activity levels recover.

We continue to expect a significant decline in industry rig utilization for the remainder of 2009. The continued recessionary environment has reduced global demand for commodities, causing prices to decline significantly. With lower cash flows and restricted access to both capital markets and credit, most E&P companies continue to reduce their 2009 drilling programs. Given recent changes in world-wide lending practices, we also continue to anticipate the cost of our debt will increase upon renewal.

In response to the current economic conditions Stoneham instituted cost containment measures in the second quarter of 2009. These include a salary and hiring freeze, a crew wage rollback and certain reductions in support staff. As well, the Compensation Committee of the Board of Directors has determined that no bonuses will be payable in respect of the 2008 fiscal year.


This news release includes selected financial information relating to the three month periods ended March 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 three month periods ended March 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 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 the Western Canada Sedimentary Basin and in 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. 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 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 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

March 31, December 31,
2009 2008


Accounts receivable $ 24,007 $ 30,023
Prepaid expenses 1,578 1,008
25,585 31,031

Property, plant and equipment 155,034 157,626

$ 180,619 $ 188,657


Bank indebtedness $ 1,375 $ 5,790
Accounts payable and accrued liabilities 7,085 10,781
Distributions payable - 401
Current portion of long-term debt 8,375 4,375
16,835 21,347

Long-term debt 58,625 65,625
Future income taxes 5,059 3,228
80,519 90,200


Unitholders' capital 89,198 89,198
Accumulated earnings 58,586 56,141
Accumulated distributions to unitholders (47,684) (46,882)
100,100 98,457

$ 180,619 $ 188,657

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

Three months ended March 31,
2009 2008

REVENUE $ 24,188 $ 31,641

Operating 15,312 20,437
Amortization 2,652 3,402
General and administrative 1,404 1,324
Interest on long-term debt 639 1,120
Other interest 43 67
Gain on disposal of property, plant and equipment (113) -
19,937 26,350

Earnings before income taxes 4,251 5,291
Future income tax expense 1,806 716

Net earnings and comprehensive income for the
period 2,445 4,575

Accumulated earnings, beginning of period 56,141 41,157

Accumulated earnings, end of period $ 58,586 $ 45,732

Earnings per unit
Basic and diluted $ 0.30 $ 0.57

Consolidated Statements of Cash Flows
Unaudited - stated in thousands

Three months ended March 31,
2009 2008

Net earnings for the period
Adjustment for items not affecting cash:
Amortization 2,652 3,402
Gain on disposal of property, plant and equipment (113) -
Future income tax expense 1,806 716
6,790 8,693

Change in non-cash working capital relating
to operating activities 2,141 (2,749)
8,931 5,944
Purchase of property, plant and equipment (249) (4,694)
Proceeds on disposal of property, plant and
equipment 303 -
Change in non-cash working capital relating
to investing activities (367) (282)
(313) (4,976)

Long-term debt repayments (3,000) -
Distributions paid and payable to Trust unitholders (802) (3,009)
Change in non-cash working capital relating
to financing activities (401) -
(4,203) (3,009)

Increase (decrease) in cash and cash equivalents 4,415 (2,041)
Bank indebtedness, beginning of period (5,790) (3,055)

Bank indebtedness, end of period $ (1,375) $ (5,096)

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