Stoneham Drilling Trust
TSX : SDG.UN

Stoneham Drilling Trust

March 26, 2009 08:00 ET

Stoneham Drilling Trust (TSX:SDG.UN) Announces Financial Results for the Fourth Quarter and Year Ended December 31, 2008

CALGARY, ALBERTA--(Marketwire - March 26, 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) continued to experience strong results during the fourth quarter. Increased rig capacity, improved rig utilization and expansion into the U.S. resulted in substantially higher revenue, cash flow and net earnings.



FINANCIAL HIGHLIGHTS
Three months ended
December 31, Year ended December 31,
(000s except for 2008 2007 2008 2007
per trust unit amounts) $ $ Change $ $ Change

Revenue 37,071 26,042 42% 112,691 65,922 71%
Net earnings 7,980 4,987 60% 14,984 5,996 150%
Per trust unit
(basic and diluted) 0.99 0.62 60% 1.87 0.75 149%
Cash flow from
operations (1) 12,691 7,680 65% 27,070 17,245 57%
Per trust unit
(basic and diluted) 1.58 0.96 65% 3.37 2.15 57%
Cash flow from
operating activities 12,643 1,217 -% 22,018 11,905 85%
Per trust unit
(basic and diluted) 1.58 0.15 -% 2.74 1.48 85%
EBITDA (1) 13,712 8,809 56% 31,422 20,329 55%

Distributions paid and
payable 2,407 3,009 -20% 11,434 13,840 -17%
Units outstanding
(weighted average
and diluted) 8,023 8,023 0% 8,023 8,023 0%


(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 year ended December 31, 2008.


OPERATING HIGHLIGHTS

Three months
ended Years ended
December 31, % December 31, %
2008 2007 Change 2008 2007 Change
----------------------------------------------------------------------------
Average number of
rigs (1) 19.0 16.2 17% 18.8 14.0 34%
Rigs at period end
Canada 16 18 -11% 16 18 -11%
U.S. 3 - - 3 - -

Canada
Operating days (2) 1,090 1,060 3% 3,679 2,807 31%
Stoneham rig
utilization rate (3) 74.0% 70.8% 5% 61.1% 55.2% 11%
CAODC industry
average (3) 43.0% 37.1% 16% 41.6% 37.7% 10%
U.S.
Operating days (2) 235 - - 620 - -
Stoneham rig
utilization rate 85.1% - - 84.7% - -

Total
Operating days (2) 1,325 1,060 25% 4,299 2,807 53%
Stoneham rig
utilization rate 75.8% 70.8% 7% 63.6% 55.2% 15%


(1) Rig 18, which was completed in November 2007 was deployed in February
2008. Rig 17 was completed in the first quarter of 2008 and deployed in
March. 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.
(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 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
denominator).


In the fourth quarter of 2008, total operating days increased 25% due to additional rig capacity, improved rig utilization in Canada and high activity levels for our three U.S.-based drilling rigs. Overall rig utilization increased 7% as compared to the prior year and Stoneham's Canadian-based rigs outperformed the Canadian industry average utilization rate by 72% for the three months ended December 31, 2008.

Revenue for the fourth quarter was up 42% from the same period last year due to increased activity, certain price increases, the strength of the U.S. dollar and higher cost recoverable charges. Revenue from U.S. operations reached $9.0 million in the quarter, or 24% of total revenue. Cash flow from operations increased 65% due to the higher revenues and a slight increase in operating margins caused in part by certain exchange gains. Net earnings rose 78% to $8.9 million, as higher cash flow from operations was offset in part by higher amortization expense associated with a 25% increase in operating days.

Capital expenditures totaled $0.7 million, $10.0 million lower than the same period last year, as a result of completion of the rig construction program at the end of 2007 and operations centre in Leduc in early 2008. As at December 31, 2008, bank indebtedness was $5.8 million and outstanding long-term debt was $70.0 million. This was a reduction of $5.0 million from September 30, 2008 due to a repayment made during the quarter. The current portion of long term debt was $4.4 million as at December 31, 2008.

Distributions paid and payable during the quarter totalled $2.4 million, a reduction of $0.6 million from the same quarter last year and the first three quarters of 2008. During 2008, monthly distributions were $0.125 per trust unit but reduced to $0.05 per trust unit commencing December 2008. Economic uncertainties prompted us to announce on March 4, 2009, the indefinite suspension of distributions. The suspension will allow us to appropriately manage and maintain flexibility in our balance sheet until industry activity levels recover.

Canadian industry activity levels were 16% higher during the fourth quarter as compared to the same period last year, and 10% higher for the year. In 2009 we expect a significant reduction in total operating days as compared to 2008, as a result of the ongoing economic and commodity pricing turbulence and limited access to capital markets and credit. Accordingly, we expect revenues, operating expenses and amortization to decline in 2009; cash flows from operations and net earnings are also anticipated to be lower.

DOCUMENTS AVAILABLE ON SEDAR

This news release includes selected financial information relating to the three and twelve months ended December 31, 2008. 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, 2008 and 2007 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 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 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; 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

December 31, December 31,
stated in thousands 2008 2007
----------------------------------------------------------------------------

ASSETS

Current
Accounts receivable $ 30,023 $ 22,023
Prepaid expenses 1,008 890
----------------------------------------------------------------------------
31,031 22,913
Property, plant and equipment 157,626 163,438
----------------------------------------------------------------------------
$ 188,657 $ 186,351
----------------------------------------------------------------------------
----------------------------------------------------------------------------

LIABILITIES

Current
Bank indebtedness $ 5,790 $ 3,055
Accounts payable and accrued liabilities 10,781 13,649
Distributions payable 401 1,003
Current portion of long-term debt 4,375 -
----------------------------------------------------------------------------
21,347 17,707

Long-term debt 65,625 69,500
Future income taxes 3,228 4,238
----------------------------------------------------------------------------
90,200 91,445

UNITHOLDERS' EQUITY

Unitholders' capital 89,198 89,198
Accumulated earnings 56,141 41,157
Accumulated distributions to unitholders (46,882) (35,449)
----------------------------------------------------------------------------
98,457 94,906

$ 188,657 $ 186,351
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Consolidated Statements of Earnings,
Comprehensive Income and
Accumulated Earnings
Twelve months
stated in thousands, except for Three months ended ended
per trust unit amounts December 31, December 31,
----------------------------------------------------------------------------

2008 2007 2008 2007

REVENUE $ 37,071 $ 26,042 $112,691 $ 65,922
----------------------------------------------------------------------------

EXPENSES

Operating 21,941 15,977 75,565 40,657
Amortization 4,246 2,817 13,345 7,011
General and administrative 1,418 1,256 5,704 4,936
Interest on long-term debt 896 1,084 4,009 2,899
Other interest 125 45 343 185
Gain on disposal of property,
plant and equipment (292) - (194) -
----------------------------------------------------------------------------
28,334 21,179 98,772 55,688
----------------------------------------------------------------------------

Earnings before income taxes 8,737 4,863 13,919 10,234
Future income tax expense
(recovery) (142) (124) (1,065) 4,238
----------------------------------------------------------------------------

Net earnings and comprehensive
income for the period 8,879 4,987 14,984 5,996

Accumulated earnings, beginning of
period 47,262 36,170 41,157 35,161
----------------------------------------------------------------------------

Accumulated earnings, end of
period $ 56,141 $ 41,157 $ 56,141 $ 41,157
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Earnings per unit
Basic and diluted $ 1.11 $ 0.62 1.87 $ 0.75


Certain figures in the results of the three and twelve month periods ended
December 31, 2008 have been regrouped for presentation purposes.


Consolidated Statements of Cash Flows
Twelve months
Three months ended ended
stated in thousands December 31, December 31,
----------------------------------------------------------------------------

2008 2007 2008 2007

OPERATING ACTIVITIES
Net earnings for the period $ 8,879 $ 4,987 $ 14,984 $ 5,996
Adjustment for items not affecting
cash:
Amortization 4,246 2,817 13,345 7,011
Gain on disposal of property,
plant and equipment (292) - (194) -
Future income tax expense
(recovery) (142) (124) (1,065) 4,238
----------------------------------------------------------------------------
12,691 7,680 27,070 17,245
Changes in non-cash working
capital relating to operating
activities (48) (6,463) (5,052) (5,340)
----------------------------------------------------------------------------
12,643 1,217 22,018 11,905
----------------------------------------------------------------------------

INVESTING ACTIVITIES
Purchase of property, plant and
equipment (701) (10,674) (8,650) (52,118)
Proceeds on disposal of property,
plant and equipment 799 - 1,302 -
Changes in non-cash working
capital relating to investing
activities (1,935) 1,223 (5,869) (3,297)
----------------------------------------------------------------------------
(1,837) (9,451) (13,217) (55,415)
----------------------------------------------------------------------------

FINANCING ACTIVITIES
Long-term debt financing - 9,500 5,500 62,290
Long-term debt repayments (5,000) - (5,000) (4,500)
Distributions paid and payable to
Trust unitholders (2,407) (3,009) (11,434) (13,840)
Changes in non-cash working
capital relating to financing
activities (602) (200) (602) (200)
----------------------------------------------------------------------------
(8,009) 6,291 (11,536) 43,750
----------------------------------------------------------------------------

Increase (decrease) in cash and
cash equivalents 2,797 (1,943) (2,735) 240
Bank indebtedness, beginning of
period (8,587) (1,112) (3,055) (3,295)
----------------------------------------------------------------------------

Bank indebtedness, end of period $ (5,790) $ (3,055) $ (5,790) $ (3,055)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Certain figures in the results of the three and twelve month periods ended
December 31, 2008 have been regrouped for presentation purposes.


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

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