Xtreme Coil Drilling Corp.
TSX : XDC

Xtreme Coil Drilling Corp.

March 14, 2011 20:28 ET

Xtreme Coil Announces 2010 Year-End Results and Plans for Fleet Expansion

CALGARY, ALBERTA--(Marketwire - March 14, 2011) - Xtreme Coil Drilling Corp. ("Xtreme Coil", the "Company") (TSX:XDC) announces filing on SEDAR of the audited Consolidated Financial Statements and Notes to the audited Consolidated Financial Statements and Management's Discussion and Analysis for the twelve months ended December 31, 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 Tuesday, March 15, 2011 beginning promptly at 9:00am MDT (10:00am CDT; 11:00am EDT) to discuss Xtreme Coil's 2010 year-end financial and operating results. Rod Uchytil, President and Chief Executive Officer, will host the conference call with participation from Tom Wood, Executive Chairman and other members of management.

To participate in the conference call, please dial in approximately ten minutes before the start time in your time zone +1 800-952-6845 (North America Toll-Free) or +1 416-695-6616 (Alternate). An audio replay of the call will be available until Friday, March 25, 2011. To access the replay, call +1 905-694-9451 or +1 800-408-3053 and enter pass code 2125478, followed by the pound (#) sign.

Highlights - 2010



- revenue of $85.6 million;
- EBITDA of $22.1 million;
- gross margin of $35.4 million;
- net income per common share - basic $0.11;
- operating days of 3,247;
- rig utilization 72 percent at December 31, 2010 reflecting successful
redeployment of rigs to the United States from M,xico.

Early 2011 First Quarter
- 81 percent of rigs contracted at end of 2011 1Q;
- contracted second new-build XTC 500 designed for unconventional resource
play in Colorado;
- phase one 2011 capital forecast approved by board of directors at $59
million;
- fleet now includes four XTC 500 drilling rigs; two operating, two under
construction for contracts;
- modifications continuing to XTC 200DTPLUS to prepare for well
intervention clean-outs of longer horizontal sections with larger diameter
tubing;
- purchase of five masted coiled tubing service rigs with delivery planned
for March 31;
- during 2011, rig fleet expected reach at least 23 rigs including
new-build rigs and coiled tubing service rigs.


Excerpt from Management's Discussion and Analysis

for the twelve months ended December 31, 2010

Outlook

During the fourth quarter of 2010, Xtreme Coil deployed additional drilling rigs to commence operations in the Bakken development in North Dakota and in the Denver-Julesburg basin in Colorado. As of December 31, 2010, ten of the Company's sixteen rigs in the fleet were operating in the US and two rigs were operating in Saudi Arabia. A previously announced new-build XTC 500 rig contracted for work in the Bakken is expected to commence operations in the second quarter of 2011. As we deploy rigs throughout the United States, Xtreme Coil is broadening both the range of drilling operations and our customer base.

Xtreme Coil's deep re-entry drilling operations in Saudi Arabia continued throughout the fourth quarter of 2010 delivering consistent performance. Several leading-edge advancements in drilling techniques have delivered new benchmark performance for the Middle East's deep horizontal under-balanced coiled tubing re-entry wells by significantly increasing the rate of penetration and the footage drilled per day. We believe the new automation technologies Xtreme Coil is developing for these operations have the potential to yield increasing value to our customers operating in North America's unconventional resource plays. We continue to pursue opportunities to expand the Company's successful re-entry drilling operations in the Middle East.

Following 2010 year-end, an XTC 400 rig that had worked in the DJ Basin was redeployed to Texas where we upgraded it to the XTC 500 design before commencing operations in the Eagle Ford shale where longer, deeper horizontal wells are frequently required. The three rigs stacked in Mexico moved to Texas and Xtreme Coil's office near Poza Rica has since closed. One of the XTC 200ST rigs from Mexico was signed to a term contract in Mississippi and has recently commenced operations drilling relief vent wells at a salt dome storage facility. Thus, at the time of this news release, 13 of 16 available rigs were operating for a utilization rate of 81 percent.

Since the beginning of March 2011, we have executed a new term contract with an independent E&P company to provide a new-build XTC 500 rig for operations in the Niobrara shale. Delivery of this new rig is planned for the third quarter of 2011 and its deployment will increase Xtreme Coil's drilling fleet to 18 rigs. We have also executed a new twelve-month contract for our rig working in Texas drilling Austin Chalk wells.

Field testing of Xtreme Coil's specialty rig for the mining industry has progressed somewhat slower than expected primarily due to prolonged cold weather. The Company now expects any determination of commerciality could be pushed into the second quarter of 2011. To date, we continue to be encouraged by developments with this innovative rig. During the first quarter of 2011, Xtreme Coil executed a collaboration agreement with another company developing downhole technology for drilling hard rock for the geothermal industry. This may provide future alternatives for crossover of technologies with application to both mining and geothermal hard rock drilling.

In Australia, there were no new developments during the fourth quarter of 2010, nor year-to-date in 2011, regarding the proposed drilling programs and related tenders being pursued by Xtreme Coil in cooperation with our joint venture partner. We continue to believe Xtreme Coil's Coil Over Top Drive ® ("COTD®") rigs could contribute added value to these potential projects. In particular, Xtreme Coil offers proven competence in the design and construction of advanced technology drilling rigs which would respond specifically to the Australian drilling market.

Late in February 2011, Xtreme Coil announced the purchase of five coiled tubing services rigs to enhance our entry into coil servicing. The five rigs being added to Xtreme Coil's fleet are highly mobile masted coil rigs. They are intended for contracts involving re-entry, coiled tubing clean-outs, fracturing, wellbore extensions, production logging, perforating, stimulations and other well servicing work and will be upgraded to Xtreme Coil's standards before commencing field operations. We anticipate the initial markets for these rigs will be the Eagle Ford and Bakken unconventional shale plays.

We expect these coiled tubing service rigs will provide a new platform for Xtreme Coil to deploy our patented technology. As the length of the horizontal sections in shale wells has extended, our technology can offer alternatives for our customers seeking to perform coiled tubing services in these well paths. We expect to offer some of the deepest capacity coiled tubing rigs in the world capable of running larger diameter strings of coil to access the longer lateral lengths. For example, for the conversion of the XTC 200 series rigs for well servicing we will utilize 2-5/8 inch coiled tubing.

Following construction of the announced new-build rigs and completion of the purchase of the coil service rigs, Xtreme Coil's rig fleet will consist of:

- 23 rigs in total - 16 drilling and 7 coil service;

- 16 COTD® drilling rigs;

- 2 coil service rigs as conversions of XTC 200 rigs;

- 5 coil service rigs.

To summarize Xtreme Coil's current contract status, including the two new-build rigs under progress:

- 13 rigs are under long term contracts of one year or longer in duration;

- 2 rigs are under multi-well contracts;

- 3 rigs are idle, of which one rig is undergoing modifications for well servicing work.

Thus, of Xtreme Coil's fleet of 16 drilling rigs, 15 or 94 percent are under contract. Furthermore, 12 of the 14 drilling rigs or 86 percent in the US fleet are working in oil or liquids-rich natural gas plays.

Xtreme Coil's phase one capital expenditures forecast of $59 million approved by the board of directors will be directed to equipment and fleet expansion and for maintenance and ongoing operations. We have allocated $10.5 million for maintenance and ongoing operations and $48.5 million for expansion.

In March 2011, Xtreme Coil reached an agreement in principle with a syndicate of three lenders on terms for a new credit facility which will provide a $15 million operating facility and a $75 million revolving loan. The new credit facility arrangements are expected to close in late March or early April 2011.

There is strong market interest in Xtreme Coil's fit-for-purpose advanced technology drilling rigs which are responding well to the drilling market shift toward unconventional resource plays. In the year ahead Xtreme Coil expects to amplify ongoing business activities to expand the rig fleet beginning with the two new-build rigs already announced.

Another major area of expansion will be marketing the Company's proven proprietary technology to well servicing projects with our developing fleet of coiled tubing service rigs which we expect to demonstrate superior capability in re-entry, coiled tubing clean-outs, fracturing, wellbore extensions, production logging, perforating, stimulations and other related work. We plan to accelerate business growth in 2011 by targeting contracts for both Xtreme Coil's drilling rigs and service rigs in liquids-rich shale plays in the Eagle Ford, the Bakken, the Niobrara and other regions.



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


2010 Dec 31 2009 Dec 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents $ 2,994 $ 21,864
Accounts receivable, net of allowance for
doubtful accounts of $322 and $0,
respectively 37,083 28,807
Other receivables 2,200 7,568
Prepaid expenses and other 2,551 2,120
Income tax recoverable 1,967 -
Inventory 5,402 4,592
----------------------------------------------------------------------------
52,197 64,951

Future income tax 6,386 7,280
Property and Equipment 238,671 239,098
Intangible assets 4,793 4,909
Goodwill - 1,630
Other tax assets 687 -
----------------------------------------------------------------------------
$ 302,734 $ 317,868
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness $ 8,317 $ -
Accounts payable and accrued liabilities 10,097 14,139
Income tax payable - 2,222
Current portion of long-term debt 12,224 12,332
----------------------------------------------------------------------------
30,638 28,693
Long-term liabilities
Long-term debt 18,952 31,344
----------------------------------------------------------------------------
18,952 31,344
Shareholders' equity
Share capital 253,848 252,797
Warrants - 1,630
Contributed surplus 8,045 4,753
Retained earnings 10,045 4,449
Accumulated other comprehensive loss (18,794) (5,798)
----------------------------------------------------------------------------
253,144 257,831
----------------------------------------------------------------------------
$ 302,734 $ 317,868
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Xtreme Coil Drilling Corp.
Consolidated Statement of
Income and Retained Earnings (Deficit)
(in thousands of Canadian dollars, except share and per share data)


Year Year
ended ended
2010 Dec 31 2009 Dec 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 85,585 $ 99,371

Expenses
Operating expenses 50,191 60,353
General and administrative expenses 13,260 13,016
Depreciation of capital assets 8,734 11,787
Amortization of intangibles 298 284
Stock-based compensation 1,493 1,261
Foreign exchange gain (976) (2,936)
Impairment of goodwill 1,630 -
Impairment of equipment 2,528 -
Loss on sale of equipment 5 15
Other income (91) -
Net Interest expense 1,728 3,158
----------------------------------------------------------------------------
Income before tax for the year 6,785 12,433

Tax expense (recovery)
Current 1,212 3,079
Future (23) (733)
----------------------------------------------------------------------------
1,189 2,346

Net income for the year 5,596 10,087
----------------------------------------------------------------------------
Retained earnings (deficit), beginning of year 4,449 (5,638)
----------------------------------------------------------------------------
Retained earnings, end of year $ 10,045 $ 4,449
----------------------------------------------------------------------------

Net income per common share
- basic $ 0.11 $ 0.22
- diluted $ 0.10 $ 0.21

Weighted average number of common shares
- basic 53,143,355 46,875,330
- diluted 53,626,123 47,192,491


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

Year Year
ended ended
2010 Dec 31 2009 Dec 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income for the year $ 5,596 $ 10,087
Other comprehensive loss
Unrealized loss on translating financial
statements of self-sustaining foreign
operations (12,996) (32,286)
----------------------------------------------------------------------------
Comprehensive loss for the year $ (7,400) $ (22,199)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

Year Year
ended ended
2010 Dec 31 2009 Dec 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Accumulated other comprehensive loss -
beginning of year $ (5,798) $ -
Impact of translating financial statements of
self-sustaining foreign operations on
January 1, 2009 - 26,488
Unrealized loss on translation of foreign
operations during the current year (12,996) (32,286)
----------------------------------------------------------------------------
Accumulated other comprehensive loss - end of
year $ (18,794) $ (5,798)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


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

Year Year
ended ended
2010 Dec 31 2009 Dec 31
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash provided by (used in) operating
activities
Net income for the year $ 5,596 $ 10,087

Items not affecting cash:
Depreciation and amortization 9,032 12,071
Stock-based compensation 1,493 1,261
Loss (gain) on sale of equipment 5 15
Amortization of financing cost - 301
Provision (reversal) for doubtful accounts 322 -
Write-off of coiled tubing 416 -
Impairment of goodwill 1,630 -
Impairment of equipment 2,528 -
Unrealized foreign exchange gain (882) (3,290)
Future income tax expense (recovery) (23) (733)
----------------------------------------------------------------------------
20,117 19,712

Changes in non-cash operating working-capital (14,193) 1,874
----------------------------------------------------------------------------
5,924 21,586
----------------------------------------------------------------------------
Financing activities
Proceeds from shares issued - 47,203
Share issue costs - (2,825)
Proceeds from exercise of stock options 1,675 141
Purchase of own shares (146) -
Proceeds from long-term debt 1,325 -
Repayment of long-term debt (11,858) (15,254)
Repayment of operating facility 8,317 (7,878)
Capital lease payments - (110)
----------------------------------------------------------------------------
(687) 21,277
----------------------------------------------------------------------------
Investing activities
Proceeds from sale of equipment 6,214 958
Capital expenditures (29,132) (17,048)
Increase in intangibles (182) (270)
Changes in non-cash working capital relating
to capital items (417) (6,649)
----------------------------------------------------------------------------
(23,517) (23,009)
----------------------------------------------------------------------------
Impact of foreign exchange on cash and cash
equivalents (590) -

Increase (decrease) in cash and cash
equivalents during the year (18,870) 19,854

Cash and cash equivalents, beginning of year 21,864 2,010
----------------------------------------------------------------------------

Cash and cash equivalents, end of year $ 2,994 $ 21,864
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Supplemental disclosure of cash flow information
Interest paid 1,851 2,897
Income tax paid 5,401 2,011


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 Coil believes expectations reflected in these FLS are reasonable, readers should not place undue reliance on them because Xtreme Coil 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 Coil considers the assumptions used to prepare this news release reasonable, based on information available to management as of March 11, 2011, 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 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 in regions where Xtreme Coil 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 Coil 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 Coil

Xtreme Coil owns and operates a fleet of proprietary, dual-purpose drilling rigs featuring the Company's patented COTD® designs. These rigs offer oil and gas companies outstanding performance and efficiency through leading-edge technology for both conventional and coil drilling. Currently, 14 rigs are located in the United States, situated in Colorado, North Dakota, Texas, Wyoming and Mississippi, and two rigs are conducting re-entry drilling operations in Saudi Arabia. Xtreme Coil's common shares trade on the Toronto Stock Exchange under the symbol "XDC."

Contact Information

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