Xtreme Coil Drilling Corp.
TSX : XDC

Xtreme Coil Drilling Corp.

August 11, 2011 21:32 ET

Xtreme Coil Announces Six Month Results and Continues Fleet Expansion

CALGARY, ALBERTA--(Marketwire - Aug. 11, 2011) - Xtreme Coil Drilling Corp. (TSX:XDC) ("Xtreme Coil", the "Company") announces filing on SEDAR of the interim unaudited Consolidated Financial Statements and Management's Discussion and Analysis for the three and six months ended June 30, 2011. Effective January 1, 2011, Xtreme Coil began reporting in accordance with International Financial Reporting Standards ("IFRS"). Prior year comparative amounts have been changed to reflect results as if the Company had always prepared its financial results using IFRS. All interim and annual reports may be viewed the Company's website www.xtremecoildrilling.com and at www.sedar.com.

Xtreme Coil has scheduled a conference call on Friday, August 12, 2011 beginning promptly at 10:00am MT (11:00am CT; 12:00am ET) to discuss Xtreme Coil's 2011 six months 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 +1 877-240-9772 (North America Toll-Free) or +1 416-340-8530 (Alternate). An audio replay of the call will be available until Friday, August 26, 2011. To access the replay, call +1 905-694-9451 or +1 800-408-3053 and enter pass code 6141700, followed by the pound (#) sign.

Highlights - 2011 Second Quarter

(with changes compared to 2010 Second Quarter)


--  revenue of $24.3 million, an increase of 61 percent 
--  EBITDA of $5.6 million, an increase of 103 percent 
--  gross margin of $8.3 million, an increase of 44 percent 
--  net income per common share - basic $0.02 
--  operating days of 1,165, an increase of 215 percent 
--  rig utilization 80 percent, an increase of 220 percent 
--  closed new $90 million credit facility 
--  completed $57.9 million bought deal equity offering 
--  increased 2011 capital program to $115 million from phase one $59
    million

In 2011 Third Quarter


--  contracted four XDR 500 new-build rigs for 2012 delivery at one per
    quarter 
--  early-released XDR 500 in Texas subsequently contracted to North Dakota
    on a two-year term 
--  new XDR 500 commenced operations in North Dakota's Bakken resource play
--  completed XSR 200 rig conversion and mobilizing to North Dakota 

Rig #18, an XDR 500, was constructed and pre-commissioned in Alberta. In July 2011, the drilling rig was mobilized to North Dakota's Bakken resource play for final commissioning and commenced operations in early August.

Excerpt from Management's Discussion and Analysis

for the three and six months ended June 30, 2011

Outlook

During the second quarter of 2011, Xtreme Coil completed a new, larger capacity credit facility and an equity financing, both of which will fund future growth. The credit agreement, finalized on May 6, 2011, with a syndicate of financial institutions, provides $90 million consisting of $15 million as a revolving operating loan facility to support financing of general corporate and working capital requirements and $75 million as an extendible loan facility to refinance existing bank indebtedness and to provide working capital for capital expenditures and potential acquisitions.

Also in May, Xtreme Coil undertook a bought deal equity offering which provided financing of approximately $57.9 million before fees at a price of $4.75 per common share. Under the terms of the bought deal, the participating underwriters exercised an overallotment option to place an additional 15 percent of the issued common shares, resulting in total issuance of 12,190,000 common shares to complete the financing.

Following the completion of new financing, the Company announced an expanded capital expenditure program of $115 million. The main components of this strategic growth plan are:


--  One new-build XDR 500 drilling rig completed in July 2011 and commenced
    operations in early August 2011. 
--  One new-build XDR 500 drilling rig expected to be completed by October
    2011.  
--  Conversion of an XDR 200 drilling rig for coiled tubing service work
    which was completed in July 2011. The conversion project had incurred
    unexpected delays. However, the newly commissioned XSR 200 rig is now
    mobilizing to North Dakota. 
--  Purchase of five existing coiled tubing service rigs and upgrading of
    these rigs to include Xtreme Coil's proprietary technology. Completion
    of these rigs is anticipated throughout the fourth quarter of 2011.
    There is some risk of delay for the anticipated deliveries primarily due
    to Xtreme Coil's reliance on third-party manufacturers. 
--  Three new-build XSR 200 coiled tubing service rigs now in design with
    completion anticipated during the third quarter of 2012 subject to
    availability of components and industry demand being experienced by
    third-party manufacturers. 
--  One new-build XDR 500 drilling rig was previously under construction in
    the phase one 2011 capital expenditure program. This rig has
    subsequently been contracted as part of a 2012 commitment for four new-
    build rigs. 
--  The purchase of long-lead time items equivalent to approximately 30 - 40
    percent of the value of one XDR 500 drilling rig. This will provide a
    timing advantage for additional discussions related to commitments for
    further new-build drilling rigs. 
--  Maintenance capital for existing operations.

During the second quarter of 2011, the XDR 200 drilling rig, which had been contracted and operating in Mississippi since the first 2011, completed its project. The rig was demobilized and stacked in Mission, Texas. As of June 30, 2011, four XDR drilling rigs were not contracted. Three of these rigs are XDR 200 drilling rigs and the fourth rig was an XDR 200 drilling rig being converted to a XSR 200 rig for coiled tubing well servicing operations and is now in transit to North Dakota. The Company continues to pursue opportunities for our XDR 200 drilling rigs. However the current market for these somewhat lower capacity drilling rigs is not as robust as the market for Xtreme Coil's large capacity drilling rigs.

The conversion of the XDR 200 drilling rig to a XSR 200 coiled tubing service rig was not completed in the second quarter as anticipated. It required additional modifications during the final commissioning stage and waited for some equipment not available in the planned time frame. Xtreme Coil is now mobilizing the rig to North Dakota where it will perform clean-outs of fracture plugs. When it arrives, a customer has committed to a field trial for this leading-edge concept service rig. Additional customers have expressed interest in using the rig following the proof-of-concept field trial.

Modifications of the five coiled tubing service rigs have continued as planned since they were added to the fleet. At the close of the second quarter, these rig upgrades remain on schedule. However, as noted earlier, there is some risk of delay. Xtreme Coil has hired some supervisory personnel and is experiencing a good flow of applicants for new positions required to operate the service rigs in North Dakota.

The Company's operations in Saudi Arabia continued during the second quarter of 2011 and continue to achieve low rig-related non-productive time and consistently superior operational results. Revenue was modestly constrained by certifications, repairs and moving times associated with other third-party contractors who participate in the overall bundled services contract. One of the underbalanced drilling equipment providers was changed during the second quarter which also resulted in some lost days for Xtreme Coil as the new sub-contractor arrived and started operations. However, the Company is expecting faster move times by the new contractor. At the close of the second quarter of 2011, there were two different sub-contractors providing underbalanced drilling equipment, the service which has had the most impact for all other parties working within the bundled services contract.

Field testing of the prototype mining rig recommenced during the second quarter of 2011 and modifications were made to certain components followed by some waiting time for required downhole tools to progress testing. The joint venture partners have not yet made a commercial determination for the rig and field testing will continue. Xtreme Coil remains encouraged with results to date and continues to be committed to this innovative prototype rig.

Subsequent to the close of the second quarter, Xtreme Coil and a customer agreed to early-release an XDR 500 rig working in the Eagle Ford. The Company subsequently entered a two-year contract for the rig with an independent operator in the Bakken in North Dakota. The relocation of this rig will expand the critical mass of operations and create regional cost efficiencies and is anticipated to commence operations in North Dakota by mid-September. Thus, Xtreme Coil expects to have three XDR 500 drilling rigs operating in the Bakken by the fourth quarter of 2011 as well as additional XSR 200 rigs expected to operate in the same resource play by the fourth quarter.

In July 2011, Xtreme Coil announced a new contract to provide four new-build XDR 500 drilling rigs in 2012. The rigs deliveries are expected to occur at a rate of one per quarter during 2012. As noted, the XDR 500 drilling rig initially being built on speculation is now dedicated for inclusion with the rigs planned for this significant contract. The remaining three drilling rigs for this contract will be included in 2012 capital expenditures.

There is continuing enthusiasm for Xtreme Coil's equipment and proprietary technology in the Saudi Arabia and other Middle East markets suggesting opportunities for future growth. However, the business development cycle in this region can be longer than in North America and management expects additional effort will be required throughout 2012 to expand operations beyond the current two rigs operating in the region.

During the last half of 2011, Xtreme Coil anticipates achieving these key milestones:


--  commencement of operations for two new-build XDR 500 drilling rigs; 
--  continuing to win additional new-build rig contracts; 
--  proof-of-concept for the 2-5/8" ultra-deep coiled tubing service rigs in
    the Bakken with our XDR 200 to XSR 200 conversion rig; 
--  completion of modifications to five coiled tubing service rigs and the
    initiation of coiled tubing services business line; and 
--  completion of field testing of our joint venture mining rig and a
    determination regarding its commerciality.

Successful completion of these priorities is expected to deliver steady growth of Xtreme Coil's fleet of drilling and service rigs throughout 2011 and into 2012. A range of current and new opportunities exist to apply the Company's proprietary technology to complex resource plays in North America.

Additional Information

Information relating to Xtreme Coil is available on SEDAR at www.sedar.com. To obtain copies of published corporate information, contact the Corporate Secretary at Xtreme Coil Drilling Corp., 1402, 500 Fourth Avenue SW, Calgary, AB T2P 2V6 (telephone +1 403 262-9500), visit Xtreme Coil's website www.xtremecoildrilling.com or e-mail ir@xtremecoil.com.


Xtreme Coil Drilling Corp.                                                  
Consolidated Statements of Financial Position                               
(unaudited)                                                                 

                                                        June 30,   December 
(in thousands of Canadian dollars)                         2011    31, 2010 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets                                                                      
Current assets                                                              
  Cash and cash equivalents                          $   11,127  $    2,994 
  Accounts receivable, net of allowance for doubtful                        
   accounts of $21 and $322, respectively                36,919      37,083 
  Other receivables                                       2,031       2,200 
  Prepaid expenses and other                              1,118       2,551 
  Income taxes recoverable                                1,798       1,967 
  Inventory                                               5,821       5,402 
----------------------------------------------------------------------------
Total Current Assets                                     58,814      52,197 

Deferred tax asset                                        4,603       4,265 
Property and equipment, net                             254,584     233,193 
Intangible assets                                         4,675       4,793 
----------------------------------------------------------------------------
Total Assets                                         $  322,676  $  294,448 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities and Shareholders' Equity                                        
Current liabilities                                                         
  Bank indebtedness                                  $        -  $    8,317 
  Accounts payable and accrued liabilities                9,915      10,097 
  Current portion of long-term debt                         500      12,224 
----------------------------------------------------------------------------
Total current liabilities                                10,415      30,638 

Long-term debt                                           14,712      18,952 
----------------------------------------------------------------------------
Total Liabilities                                        25,184      49,590 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Shareholders' equity                                                        
 Share capital                                          310,414     253,765 
 Contributed surplus                                      9,525       8,585 
 Accumulated deficit                                     (2,573)     (4,496)
 Accumulated other comprehensive loss                   (19,817)    (12,996)
----------------------------------------------------------------------------
Total Shareholders' Equity                              297,549     244,858 
----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity           $  322,676  $  294,448 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Xtreme Coil Drilling Corp.                                                  
Consolidated Statements of Income                                           
(unaudited)                                                                 

(in thousands of                                                            
 Canadian dollars,                                                          
 except share and per                                                       
 share data)                 Three months ended            Six months ended 
                     -------------------------------------------------------
                     -------------------------------------------------------
                          June 30,      June 30,      June 30,      June 30,
                             2011          2010          2011          2010 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue              $     24,267  $     15,111  $     47,438  $     40,711 

Expenses                                                                    
Operating expenses         15,978         9,372        32,503        23,829 
General and                                                                 
 administrative                                                             
 expenses                   2,664         2,964         5,170         6,662 
Depreciation of                                                             
 property and                                                               
 equipment                  2,855         2,087         5,427         4,942 
Amortization of                                                             
 intangibles                   76            73           152           146 
Stock-based                                                                 
 compensation                 618           132         1,082           554 
Foreign exchange                                                            
 (gain) loss                 (161)           67          (288)         (270)
Gain (loss) on sale                                                         
 of equipment                 (42)           19           (49)           37 
Interest expense              591           457         1,009           938 
----------------------------------------------------------------------------
Income (loss) before                                                        
 tax for the period         1,688           (60)        2,432         3,873 

Tax expense                                                                 
 (recovery)                                                                 
Current                        84          (444)          169         1,562 
Deferred                      271           331           340        (1,147)
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Total tax expense                                                           
 (recovery)                   355          (113)          509           415 
----------------------------------------------------------------------------

Net income for the                                                          
 period              $      1,333  $         53  $      1,923  $      3,458 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Net income per common                                                       
 share                                                                      
- basic              $       0.02  $          -  $       0.03  $       0.07 
- diluted            $       0.02  $          -  $       0.03  $       0.06 

Weighted average                                                            
 number of common                                                           
 shares                                                                     
- basic                57,253,022    53,183,035    55,273,993    53,114,623 
- diluted              58,012,491    53,657,584    56,059,910    53,831,352 



Xtreme Coil Drilling Corp.                                                  
Consolidated Statements of Comprehensive Income (Loss)                      
(unaudited)                                                                 
                                     Three months ended     Six months ended
                                    ----------------------------------------
                                    ----------------------------------------
                                    June 30,   June 30,  June 30,   June 30,
(in thousands of Canadian dollars)     2011       2010      2011       2010
----------------------------------------------------------------------------
Net income for the period         $   1,333  $      53 $   1,923  $   3,458
Other comprehensive income (loss)                                           
Unrealized gain (loss) on                                                   
 translating financial statements                                           
 of foreign  operations              (1,183)     8,167    (6,821)     2,183
----------------------------------------------------------------------------
Comprehensive income (loss) for the                                         
 period                           $     150  $   8,220 $  (4,898) $   5,641
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Consolidated Statements of Changes in Equity                                
(unaudited)                                                                 
                                            Share               Contributed 
(in thousands of Canadian dollars)        capital   Warrants        Surplus 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Balance at                                                                  
January 1, 2010                      $    252,714      1,630          5,509 
Currency translation                                                        
 differences                                    -          -              - 
Cancellation of warrants                              (1,630)         1,630 
Net income for the                                                          
 period                                         -          -              - 

Employee share                                                              
 option scheme:                                                             
Value of employees                                                          
 services                                     103          -            657 
Proceeds from shares                                                        
 issued                                       926          -           (103)
----------------------------------------------------------------------------
Balance at                                                                  
 June 30, 2010                       $    253,743          -          7,693 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance at                                                                  
 January 1, 2011                     $    253,765          -          8,585 
Currency translation                                                        
 differences                                    -          -              - 
Net income for the                                                          
 period                                         -          -              - 

Employee share                                                              
 option scheme:                                                             
Value of employee                                                           
 services                                     158          -          1,082 
Proceeds from shares                                                        
Issued, net of share                                                        
 issue costs                               56,491          -           (142)
----------------------------------------------------------------------------
Balance at                                                                  
 June 30, 2011                       $    310,414          -          9,525 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Consolidated Statements of Changes in Equity                                
(unaudited)                                                                 
                                                   Accumulated              
                                                         other              
                                     Accumulated comprehensive        Total 
(in thousands of Canadian dollars)       deficit    gain (loss)      equity 
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Balance at                                                                  
 January 1, 2010                          (8,924)            - $    250,929 
Currency translation                                                        
 differences                                   -         2,183        2,183 
Cancellation of warrants                                     -            - 
Net income for the                                                          
 period                                    3,458             -        3,458 

Employee share                                                              
 option scheme:                                                             
Value of employees                                                          
 services                                      -             -          760 
Proceeds from shares                                                        
 issued                                        -             -          823 
----------------------------------------------------------------------------
Balance at                                                                  
 June 30, 2010                            (5,466)        2,183 $    258,153 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance at                                                                  
 January 1, 2011                          (4,496)      (12,996)$    244,858 
Currency translation                                                        
 differences                                   -        (6,821)      (6,821)
Net income for the                                                          
 period                                    1,923             -        1,923 

Employee share                                                              
 option scheme:                                                             
Value of employee                                                           
 services                                      -             -        1,240 
Proceeds from shares                                                        
Issued, net of share                                                        
 issue costs                                   -             -       56,349 
----------------------------------------------------------------------------
Balance at                                                                  
 June 30, 2011                            (2,573)      (19,817)$    297,549 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Xtreme Coil Drilling Corp.                                                  
Consolidated Statement of Cash Flows                                        
For the six months ended June 30, 2011 and 2010                             
(unaudited)                                                                 
                                                         June 30,   June 30,
(in thousands of Canadian dollars)                          2011       2010 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Cash flow provided by (used in):                                            
Operating activities                                                        
Net income for the period                             $    1,923 $    3,458 
Items not affecting cash:                                                   
Depreciation and amortization                              5,579      5,089 
Stock-based compensation                                   1,082        554 
Gain (loss) on sale of equipment                             (49)        37 
Provision for doubtful accounts                             (292)       359 
Write-off of coiled tubing                                     -        415 
Interest expense                                           1,009        938 
Unrealized foreign exchange gain                             (23)      (168)
Deferred tax recovery                                        340     (1,147)
Interest paid                                               (867)      (968)
Changes in items of working-capital                        1,193      5,798 
----------------------------------------------------------------------------
                                                           9,895     14,365 
----------------------------------------------------------------------------
Financing activities                                                        
Proceeds from shares issued                               55,261          - 
Proceeds from exercise of stock options                      579        926 
Proceeds from long-term debt                              80,162          - 
Repayment of long-term debt                              (96,126)    (5,876)
Repayment of operating facility                           (8,317)         - 
----------------------------------------------------------------------------
                                                          31,559     (4,950)
----------------------------------------------------------------------------
Investing activities                                                        
Proceeds from sale of equipment                              190        665 
Capital expenditures                                     (32,950)   (16,228)
Increase in intangibles                                      (34)       (99)
Other                                                          -         36 
----------------------------------------------------------------------------
                                                         (32,794)   (15,626)
----------------------------------------------------------------------------
Impact of foreign exchange on cash and                                      
 cash equivalents                                           (527)       460 
----------------------------------------------------------------------------

Increase (decrease) in cash and cash                                        
 equivalents                                               8,133     (5,751)

Cash and cash equivalents,                                                  
 beginning of period                                       2,994     21,864 

----------------------------------------------------------------------------
Cash and cash equivalents,                                                  
 end of period                                        $   11,127 $   16,113 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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 and utilization of drilling and service rigs in the Company's current and future fleet. 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.

FLS are based on certain factors and assumptions including, but not limited to: the assessment of current and projected future drilling, well servicing and related operations; ongoing and future strategic business alliances, negotiations and opportunities to enter new, extend or complete existing contracts; the availability and cost of financing; 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 structures and 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, 2011, ultimately the assumptions may prove to be incorrect.

FLS 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 and well servicing market demand, currency exchange rates, and commodity prices; access to credit and to equity markets; the availability and retention of qualified personnel; vendor-provided rig components and services; and, competition for customers.

Management's assumptions considered the following: compliance with the terms of the Company's current credit facility; ongoing access to key services, supplies and components required to continue operating and maintaining equipment, including fuel; continued successful performance of drilling, well servicing 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 and well servicing 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 as well as supply and demand; fluctuation in currency exchange and interest rates; financial stability of Xtreme Coil's customers; current and future applications for Xtreme Coil's proprietary technology; related services provided by, and competition from, other drilling and well servicing 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 economic, political and military events.

FLS 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 deep capacity drilling rigs featuring the Company's patented Coil Over Top Drive(r) designs and is expanding the fleet to include extended-reach coiled tubing service rigs. These rigs offer oil and natural gas companies outstanding performance and efficiency through leading-edge technology for conventional and coil drilling and deep coil well services. We have drilling rigs under contract in Colorado, North Dakota, Texas and Wyoming. Two deep coil service rigs are conducting re-entry horizontal drilling operations in Saudi Arabia. Xtreme Coil has five coiled tubing service rigs undergoing technical upgrades before they will be ready to deploy later in 2011. A sixth deep coil service rig is in transit to North Dakota's Bakken resource play to conduct a field trial. 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
    +1 403 262 9522 (FAX)

    Xtreme Coil Drilling Corp.
    1402, 500 Fourth Avenue SW
    Calgary, Alberta T2P 2V6
    ir@xtremecoil.com
    www.xtremecoildrilling.com