Stoneham Drilling Trust

Stoneham Drilling Trust

March 28, 2008 08:00 ET

Stoneham Drilling Trust (TSX:SDG.UN) Announces Financial Results for the Fourth Quarter and Year Ended December 31, 2007

CALGARY, ALBERTA--(Marketwire - March 28, 2008) - Stoneham Drilling Trust ("Stoneham" or the "Trust") (TSX:SDG.UN) achieved improved fourth quarter results, benefitting from additional rigs in operation as a result of the 2007 rig construction program and a rig utilization rate that significantly exceeded the industry average.

(000s except for per trust Three months ended Years ended
unit amounts) December 31, December 31,
2007 2006 Change 2007 2006 Change
$ $ % $ $ %

Revenue 26,042 17,782 46% 65,922 63,215 4%
Net earnings 4,987 4,243 18% 5,996 16,006 -63%
Per trust unit (basic and
diluted) 0.62 0.53 18% 0.75 2.00 -63%
Cash flow from operations
(1) 7,680 6,220 23% 17,245 22,321 -23%
Per trust unit (basic and
diluted) 0.96 0.78 23% 2.15 2.78 -23%
EBITDA (1) 8,809 6,280 40% 20,329 21,758 -7%

Distributions paid and
payable 3,009 3,410 -12% 13,840 12,436 11%
Units outstanding (weighted
average and diluted) 8,023 8,023 0% 8,023 8,023 0%
Operating Highlights
Average number of rigs (2) 16.2 11.2 45% 14.0 10.3 36%
Rigs at December 31 18 12 50% 18 12 50%
Operating days (3) 1,060 765 39% 2,807 2,841 -1%
Stoneham utilization rate
(4) 70.8% 74.5% -5% 55.2% 75.6% -27%
CAODC industry average (4) 37.1% 47.2% -21% 37.7% 55.1% -32%

(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 year end December
31, 2007.
(2) 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. Rig 18, completed in November 2007, was deployed subsequent to
year end. In 2006, Rigs 11 and 14 were deployed in November.
(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 fourth quarter of 2007 increased 46% to $26.0 million mainly due to the addition of five new rigs throughout the year plus full fourth quarter inclusion in 2007 of two rigs that were deployed at the end of 2006. The increase in revenue is also attributed to higher daywork prices associated with the new equipment. Net earnings increased 18% to $5.0 million mainly due to the increased revenues, offset in part by substantially higher interest expense related to higher debt levels associated with the rig construction program, increased amortization associated with the increase in activity, and to a lesser degree, a slight reduction in operating margins and a small increase in general and administrative expenses.

The additional rigs resulting from the execution of our rig construction program enabled us to increase our operating days to 1,060 as compared to 765 days in the fourth quarter of 2006, an increase of 39%. Rig utilization for the quarter was 71%, down 5% from the corresponding period in 2006. Year-over-year, operating days were consistent with the prior year with only a 1% decline experienced in 2007 as the larger fleet size roughly offset the reduction in utilization. The lower rig utilization and operating days are mainly the result of factors affecting natural gas fundamentals such as depressed prices, high natural gas storage levels, and the strength of the Canadian dollar. Stoneham's rig utilization exceeded the industry average by 91% in the fourth quarter (58% in 2006) and by 46% for the year (37% in 2006).

During the fourth quarter, capital expenditures totaled $10.7 million. Approximately 80% of the expenditures related to the rig construction program with the remainder related mainly to development of the operations centre in Leduc. By year end, the rig construction program was complete with the exception of Rig 17, which was deployed in March. The operations centre is also expected to be complete and operational by the second quarter of 2008. During the quarter, $69.5 million was drawn on our 364-day extendable revolving term facility to fund a portion of these expenditures. During the quarter, Stoneham increased its availability under this facility to $75.0 million from $60.0 million. At December 31, 2007, bank indebtedness was $3.1 million and long-term debt was $69.5 million.

On October 16, 2007, we announced a $0.025 per trust unit reduction in monthly distributions to $0.125 per trust unit ($0.375 per quarter), resulting in a reduction in distributions paid and payable during the fourth quarter of $0.4 million compared with the same period in 2006.

On February 22, 2008, we announced that our indirect wholly-owned US subsidiary, Stoneham Drilling Corporation, had entered into a one year contract with the U.S. arm of an existing Canadian client to deploy two rigs to the Anadarko Basin in Oklahoma. Rig 18 was mobilized in February and Rig 17 was mobilized in March. This strategic move into the United States complements our Canadian operations, and Stoneham may deploy additional rigs to the U.S. in the future.

The weak demand for contract drilling services experienced in western Canada during 2007 is expected to continue for at least the first six months of 2008. The recent decline in storage levels and resultant improvement in natural gas prices may result in an increased demand for contract drilling services during the last half of the year.


Selected financial information relating to the three and twelve month periods ended December 31, 2007 and 2006 are included in this news release. This information should be read in conjunction with the consolidated financial statements and the notes thereto of Stoneham Drilling Trust for the years ended December 31, 2007 and 2006 and accompanying management's discussion and analysis that are being filed today with securities regulators and will be available on


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 press 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 press release contains forward-looking information and statements pertaining to the following: (i) utilization of drilling rigs in Canada and the United States; (ii) the timing for completion of drilling rigs and facilities under construction; (iii) 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 press release.

The forward-looking information and statements contained in this press 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; (ix) the timing of the delivery of drilling rigs under construction contracts; and (x) the ability to attract and retain qualified crews to crew Stoneham's drilling rigs.

The forward-looking information and statements included in this press 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 press release speak only as of the date of this press 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
stated in thousands
December 31, December 31,
2007 2006


Accounts receivable $ 22,023 $ 15,191
Prepaid expenses 890 876
22,913 16,067

Property, plant and equipment 163,438 118,331

$ 186,351 $ 134,398


Bank indebtedness $ 3,055 $ 3,295
Accounts payable and accrued liabilities 13,649 15,440
Distributions payable 1,003 1,203
Current portion of long-term debt - 1,220
17,707 21,158

Long-term debt 69,500 10,490
Future income taxes 4,238 -
91,445 31,648


Unitholders' capital 89,198 89,198
Accumulated earnings 41,157 35,161
Accumulated distributions to unitholders (35,449) (21,609)
94,906 102,750

$ 186,351 $ 134,398

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

Three months Twelve months
ended Dec 31, ended Dec 31,
2007 2006 2007 2006

REVENUE $ 26,042 $ 17,782 $ 65,922 $ 63,215

Operating 15,977 10,230 40,657 37,245
Amortization 2,817 1,977 7,011 6,315
General and administrative 1,256 1,272 4,936 4,212
Interest on term and callable debt 1,084 69 2,899 112
Other interest (net) 45 (9) 185 (675)
21,179 13,539 55,688 47,209

Earnings before income taxes 4,863 4,243 10,234 16,006
Future income tax expense
(recovery) (124) - 4,238 -

Net earnings and comprehensive
income 4,987 4,243 5,996 16,006

Accumulated earnings, beginning
of period 36,170 30,918 35,161 19,155

Accumulated earnings, end of
period $ 41,157 $ 35,161 $ 41,157 $ 35,161

Earnings per unit
Basic and diluted $ 0.62 $ 0.53 $ 0.75 $ 2.00

Consolidated Statements of Cash Flows
stated in thousands

Three months Twelve months
ended Dec 31, ended Dec 31,
2007 2006 2007 2006
Net earnings for the period $ 4,987 $ 4,243 $ 5,996 $ 16,006
Adjustment for items not affecting
Amortization 2,817 1,977 7,011 6,315
Future income tax expense
(recovery) (124) - 4,238 -
7,680 6,220 17,245 22,321
Changes in non-cash working capital
relating to operating activities (6,463) 5,850 (5,340) 2,085
1,217 12,070 11,905 24,406

Purchase of property, plant
and equipment (10,674) (29,016) (52,118) (65,857)
Changes in accounts payable
relating to investing activities 1,223 794 (3,297) 4,549
(9,451) (28,222) (55,415) (61,308)

Long-term debt financing 9,500 11,000 62,290 11,035
Term and callable debt
repayments - - (4,500) (852)
Distributions paid and payable
to Trust unitholders (3,009) (3,410) (13,840) (12,436)
Changes in accounts payable
relating to financing activities (200) 201 (200) 201
6,291 7,791 43,750 (2,052)

Increase (decrease) in cash
and cash equivalents (1,943) (8,361) 240 (38,954)
Cash and cash equivalents
(bank indebtedness), beginning
of period (1,112) 5,066 (3,295) 35,659

Bank indebtedness, end
of period $ (3,055) $ (3,295) $ (3,055) $ (3,295)

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

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