Xtreme Coil Drilling Corp.
TSX : XDC

Xtreme Coil Drilling Corp.

November 12, 2010 09:00 ET

Xtreme Coil Announces 2010 Nine Month Results

CALGARY, ALBERTA--(Marketwire - Nov. 12, 2010) - Xtreme Coil Drilling Corp. (TSX:XDC) ("Xtreme Coil", the "Company") announces filing on SEDAR of the unaudited Consolidated Financial Statements and Notes to the unaudited Consolidated Financial Statements and Management's Discussion and Analysis for the three and nine months ended September 30, 2010. These documents may be viewed at www.sedar.com and the Company's website www.xtremecoildrilling.com.

Xtreme Coil has scheduled a conference call on Monday, November 15th to begin promptly at 9:00am MT (10:00am CT; 11:00am ET) to review the Company's 2010 three and nine month financial and operating results. Rod Uchytil, President and Chief Executive Officer will host the call, with participation by Tom Wood, Executive Chairman, and members of senior management, and will answer questions from financial analysts and investors.

To participate in the conference call, please dial in as follows approximately ten minutes before the start time +1 888-340-9761 (North America Toll-Free) or +1 416-340-8530 (Alternate). An audio replay of the call will be available until Friday, November 26, 2010. To access the replay, call +1 416-695-5800 or +1 800-408-3053 and enter pass code 1106520, followed by the pound (#) sign.



Highlights - 2010 Nine Months

-- revenue of $62.0 million
-- EBITDA of $18.0 million
-- gross margin of $27.3 million
-- net income per common share - basic $0.10
-- operating days of 2,190
-- rig utilization 50 percent, reflecting ongoing redeployment of rigs to
United States from Mexico
-- in Saudi Arabia, two customized deep horizontal re-entry rigs commenced
drilling in August and in late September under long-term contract
-- formed joint venture with AJ Lucas Group in Australia to introduce
Xtreme Coil's proprietary, built-for-purpose equipment designed
specifically for coal seam gas and other drilling projects
-- completed and contracted customized XTC 500 designed for resource plays
in North Dakota
-- XTC 750 rig commenced design stage

Early 2010 Fourth Quarter

-- rig utilization 75 percent
-- first XTC 500 rig began drilling in North Dakota's Bakken development
-- XTC 500 new-build rig announced expected to commence operations under
contract in Bakken development in North Dakota in 2011 2Q
-- XTC 400 rig commenced drilling in Austin Chalk region of Texas
-- appointed Tyson Seeliger to the position of Vice President, Sales and
Marketing


Excerpt from Management's Discussion and Analysis for the three and nine months ended September 30, 2010

Outlook

During the third quarter of 2010, Xtreme Coil continued to redeploy drilling rigs to the United States from Mexico with three Coil Over Top Drive® ("COTD®") rigs commencing operations during the month of August. Early in the fourth quarter, two additional rigs commenced operations - one in North Dakota and one in Colorado. Late in October, the Company announced a contract for a new-build XTC 500 rig planned to work in the Bakken development in North Dakota. This represents Xtreme Coil's first new-build rig since 2008 and it will be the 17th in the Company's fleet of advanced technology rigs. This new large capacity drilling rig is projected to commence drilling operations in the second quarter of 2011. The market for new technology, AC (or alternating current) electric, top drive drilling rigs has continued to improve in the US. Xtreme Coil believes there are further opportunities in this market for contracts requiring new-build rigs.

During the third quarter of 2010, drilling also commenced in Saudi Arabia where the first and second rigs initiated operations in August and September, respectively. These rigs are establishing new technical and operational benchmarks with the introduction of newly-developed intellectual property to respond to customer and project requirements, including automated programs for milling casing windows, pressure-deploying bottom hole assemblies and drilling the build and horizontal sections. The Company's drilling operations in Saudi Arabia are conducted exclusively with coiled tubing in the region's high pressure, deep horizontal re-entry wells. Xtreme Coil is focused on developing and delivering step-change improvements and innovations that provide advanced coiled tubing drilling and related services to its customers.

Business activities during the second and third quarters of 2010 were challenging for Xtreme Coil and counter-cyclical, to some degree, from the activities of our competitors in North America, as the Company addressed the sudden decrease of activity in Mexico which occurred at the end of the first quarter. The Company's redeployment efforts have produced favourable results as it entered into new contracts for several of its drilling rigs. Xtreme Coil now has 12 of 16 rigs under contract and has contracted one new-build rig. To view a photo of XTC 400 drilling in the Austin Chalk region of Texas, please visit the following link: http://media3.marketwire.com/docs/1112xdc_rig.jpg.

Of the four rigs in the fleet not currently under contract, one XTC 200 DTPLUS is being prepared for expected deployment to North Dakota's Bakken project by early 2011. The three drilling rigs that remain stacked in Mexico are all XTC 200 series rigs and Xtreme Coil continues to explore a range of opportunities for redeployment to projects within or outside North America. The results of the initial XTC 200 rig being deployed to the Bakken could influence the next phase of activity for the remaining three rigs.

Field testing of the specialty rig undertaken as a research and development project for the mining industry has progressed as anticipated with encouraging results. The Company expects to assess the commerciality of operations during this testing period and could reach a decision by late 2010. If rig operations are deemed potentially commercial, the Company expects the first rig will be deployed to Africa. Thereafter, in collaboration with a joint venture partner, the Company expects to formulate and execute a business plan which could require the fabrication and deployment of multiple rigs.

The spectrum for future projects in Australia for Xtreme Coil's COTD® rigs remains vibrant. The joint venture formed with AJ Lucas Group Limited provides the strategic means to pursue new work aggressively in a number of regional Australian markets and with a range of well-established customers. Recently announced federal approvals are encouraging and may move forward plans for significant new drilling programs for which Xtreme Coil's advanced technology is ideally suited. In particular, Xtreme Coil can design and build fit-for-purpose drilling rigs specifically for that country's project specifications.

Xtreme Coil's innovative approach to a broad range of drilling projects throughout the United States and in other international regions is attracting interest and acceptance from new and potential customers. Xtreme Coil continues to seek and develop opportunities to contract new-build rigs to expand the size and capability of the Company's rig fleet. To contribute to the next phase of Xtreme Coil's growth, the board of directors recently appointed a vice president, sales and marketing.

Xtreme Coil intends to utilize its position as the provider of the world's largest, deepest coil drilling services by moving the Company's proven technology into well servicing projects required in the expanding resource plays throughout the United States. The Company will focus on developing this new area of business beginning in 2011.

The Company believes continuing demand for deeper capacity rigs in more technically-challenging horizontal and re-entry drilling markets will require the competitive advantage of Xtreme Coil's dual-purpose COTD® rigs. Xtreme Coil's newest drilling rig design, the XTC 750, will address drilling in deeper, higher pressure formations. This rig will have all the proven features of the current larger working models in addition to a modular self-elevating mast and substructure with more hook load and pipe racking capacity. The XTC 750 will accommodate the larger, high pressure blow-out preventers required in deeper formations throughout the United States and Australia, as well as in the Middle East.



Xtreme Coil Drilling Corp.
Consolidated Balance Sheets
(in thousands of Canadian dollars)
(unaudited)


2010 Sep 30 2009 Dec 31
----------------------------------------------------------------------------
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Assets
Current assets
Cash and cash equivalents $ 3,190 $ 21,864
Accounts receivable, net of allowance for
doubtful accounts of $334 and
$0, respectively 35,885 28,807
Other receivables 2,404 8,075
Prepaid expenses and other 2,904 1,613
Income tax recoverable 707 -
Inventory 2,832 4,592
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47,922 64,951

Future income tax 7,698 7,280
Equipment 245,905 239,098
Intangible assets 4,800 4,909
Goodwill - 1,630
Other tax assets 687 -
Other long-term assets 775 -
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$ 307,787 $ 317,868
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Liabilities and Shareholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 11,599 $ 14,139
Income tax payable - 2,222
Other current liabilities 382 -
Current portion of long-term debt 12,322 12,332
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24,303 28,693
Long-term liabilities
Long-term debt 22,349 31,344
Other long-term liabilities 462 -
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22,811 31,344
Shareholders' equity
Share capital 253,681 252,797
Warrants - 1,630
Contributed surplus 7,558 4,753
Retained earnings 9,579 4,449
Accumulated other comprehensive loss (10,145) (5,798)
----------------------------------------------------------------------------
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260,673 257,831
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$ 307,787 $ 317,868
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Xtreme Coil Drilling Corp.
Consolidated Statement of Income and Retained Earnings
(in thousands of Canadian dollars, except share and per share data)
(unaudited)


Three Three Nine Nine
Months Months Months Months
ended ended ended ended
2010 2009 2010 2009
Sep 30 Sep 30 Sep 30 Sep 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 21,310 $ 26,153 $ 62,021 $ 72,119

Expenses
Operating expenses 10,900 14,624 34,729 43,810
General and
administrative
expenses 2,656 3,960 9,317 9,174
Depreciation of capital
assets 1,881 3,012 5,244 8,591
Amortization of
intangibles 74 71 220 212
Stock-based compensation 400 350 1,024 943
Foreign exchange gain (334) (1,969) (604) (2,744)
Impairment of goodwill 1,630 - 1,630 -
Impairment of equipment 2,528 - 2,528 -
Loss (gain) on sale of
equipment (32) (38) 5 (38)
Other income (25) - (25) -
Net Interest expense 373 680 1,311 2,559
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Income before tax for the
period 1,259 5,463 6,642 9,612

Tax expense (recovery)
Current 278 2,828 1,840 1,732
Future 754 (99) (328) 841
----------------------------------------------------------------------------
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1,032 2,729 1,512 2,573

Net income for the period 227 2,734 5,130 7,039
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Retained earnings
(deficit), beginning
of period 9,352 (1,333) 4,449 (5,638)
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Retained earnings,
end of period $ 9,579 $ 1,401 $ 9,579 $ 1,401
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Net income per common
share
- basic $ 0.00 $ 0.05 $ 0.10 $ 0.16
- diluted $ 0.00 $ 0.05 $ 0.10 $ 0.16
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Weighted average number
of common shares
- basic 53,147,785 52,844,789 53,125,800 44,854,435
- diluted 53,391,098 53,593,863 53,636,971 44,935,321


Xtreme Coil Drilling Corp.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands of Canadian dollars)
(unaudited)

Three Three Nine Nine
Months Months Months Months
ended ended ended ended
2010 2009 2010 2009
Sep 30 Sep 30 Sep 30 Sep 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income for the
period $ 227 $ 2,734 $ 5,130 $ 7,039
Other comprehensive loss
Unrealized loss on
translating
financial statements of
self-sustaining
foreign operations (6,530) (18,671) (4,347) (29,364)
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Comprehensive income
(loss) for the period $ (6,303) $ (15,937) $ 783 $ (22,325)
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Xtreme Coil Drilling Corp.
Consolidated Statements of Accumulated Other Comprehensive Loss
(in thousands of Canadian dollars)
(unaudited)

Three Three Nine Nine
Months Months Months Months
ended ended ended ended
2010 2009 2010 2009
Sep 30 Sep 30 Sep 30 Sep 30
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated other
comprehensive loss
- beginning of period $ (3,615) $ - $ (5,798) $ -
Impact of translating
financial statements
of self-sustaining
foreign operations
on January 1, 2009 - 15,795 - 26,488
Unrealized loss on
translation of foreign
operations during the
current period (6,530) (18,671) (4,347) (29,364)
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Accumulated other
comprehensive loss
- end of period $ (10,145) $ (2,876) $ (10,145) $ (2,876)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Xtreme Coil Drilling Corp.
Consolidated Statement of Cash Flows
(in thousands of Canadian dollars)
(unaudited)

Three Three Nine Nine
Months Months Months Months
ended ended ended ended
2010 2009 2010 2009
Sep 30 Sep 30 Sep 30 Sep 30
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Cash provided by (used
in) operating
activities
Net income for the
period $ 227 $ 2,734 $ 5,130 $ 7,039

Items not affecting
cash:
Depreciation and
amortization 1,955 3,083 5,464 8,803
Stock-based compensation 400 350 1,024 943
Loss (gain) on sale of
equipment (32) (38) 5 (38)
Amortization of
financing cost - - - 276
Provision (reversal)
for doubtful accounts (25) - 334 -
Write-off of coiled
tubing - - 415 -
Impairment of goodwill 1,630 - 1,630 -
Impairment of equipment 2,528 - 2,528 -
Unrealized foreign
exchange gain (342) (1,947) (510) (3,048)
Future income tax
expense (recovery) 754 (99) (328) 841
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7,095 4,083 15,692 14,816

Changes in non-cash
operating
working-capital (13,211) (1,334) (7,443) (1,855)
----------------------------------------------------------------------------
(6,116) 2,749 8,249 12,961
----------------------------------------------------------------------------
Financing activities
Proceeds from shares
issued - - - 47,203
Share issue costs - - - (2,757)
Proceeds from exercise
of stock options 95 96 1,021 96
Purchase of own shares (146) - (146) -
Proceeds from long-term
debt 1,325 - 1,325 -
Repayment of long-term
debt (2,931) (12,231) (8,807) (11,687)
Repayment of operating
facility - (4,787) - (7,878)
Capital lease payments - (66) - (110)
----------------------------------------------------------------------------
(1,657) (16,988) (6,607) 24,867
----------------------------------------------------------------------------
Investing activities
Proceeds from sale of
equipment 5,996 102 6,661 368
Capital expenditures (10,131) (10,983) (26,359) (15,488)
Increase in intangibles (12) (34) (111) (168)
Changes in non-cash
working capital relating
to capital items (586) 2,028 (550) (4,041)
----------------------------------------------------------------------------
(4,733) (8,887) (20,359) (19,329)
----------------------------------------------------------------------------

Impact of foreign
exchange on cash and
cash equivalents (417) - 43 -

Increase (decrease) in
cash and cash
equivalents (12,923) (23,126) (18,674) 18,499
during the period

Cash and cash
equivalents, beginning
of period 16,113 43,635 21,864 2,010

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Cash and cash
equivalents, end of
period $ 3,190 $ 20,509 $ 3,190 $ 20,509
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Supplemental disclosure
of cash flow
information
Interest paid 466 693 1,434 2,295
Income tax paid - 1,014 5,611 1,152


Reader Advisory

This news release contains forward-looking statements. More particularly, this news release contains statements that may relate to contracting, marketing, financing, construction, 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 statements herein may relate to trade credit insurance carried by the Company to mitigate receivables collection risk. Although Xtreme Coil believes the expectations reflected in these forward-looking statements are reasonable, readers should not place undue reliance on the statements because Xtreme Coil can give no assurance they will prove to be correct. There are many factors that could cause forward-looking statements 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 labour, in a cost-effective and timely manner; the issuance of applied-for patents; changes in tax rates; and government regulations. Although Xtreme Coil considers the assumptions used to prepare this news release reasonable, based on information available to management as of August 10, 2010, 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, fluctuation in 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 included the following: compliance with the terms of the Company's 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 contracts; revenue expectations related to shorter-term drilling opportunities; willingness and ability of customers to remit amounts owing to Xtreme Coil 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 Coil's customers; current and future applications for Xtreme Coil's proprietary technology; competition from other drilling contractors; regulatory and economic conditions; 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 herein. Readers should not place undue importance on forward-looking statements and should not rely on this information as of any other date. Except as required by applicable securities laws, Xtreme Coil disclaims any intention, and assumes no obligation, to revise any forward-looking statements to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such forward-looking statements or otherwise.

The forward-looking statements contained in this news release are made as of the date hereof and Xtreme Coil undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Corporate Profile

Xtreme Coil develops and applies leading-edge patented and patent-related technology and designs to build, transport, and operate new COTD® drilling rigs. In addition to contracts negotiated in the United States of America, the Kingdom of Saudi Arabia and the United Mexican States, Xtreme Coil markets proprietary, dual-purpose drilling rigs to existing and potential customers and to other international operating regions. Xtreme Coil drills with larger coil and with conventional drill pipe to reach hydrocarbons in deeper horizons. Including the most recent rig design, the XTC 500, Xtreme Coil's fit-for-purpose rigs feature high capacity injectors as well as innovative handling of conventional pipe and coiled tubing, modular transportation systems and operating methods for achieving deeper, faster and safer drilling. Xtreme Coil's common shares trade on the TSX under the symbol "XDC".


Contact Information

  • Xtreme Coil Drilling Corp.
    Rod Uchytil
    President and Chief Executive Officer
    +1 403 262 9500
    +1 403 262 9522 (FAX)
    or
    Xtreme Coil Drilling Corp.
    Elizabeth T. Wilkinson
    Chief Financial Officer
    +1 403 262 9500
    +1 403 262 9522 (FAX)
    or
    Xtreme Coil Drilling Corp.
    1402, 500 Fourth Avenue SW
    Calgary, Alberta T2P 2V6
    ir@xtremecoil.com
    www.xtremecoildrilling.com