Xtreme Drilling and Coil Services

TSX : XDC


Xtreme Drilling and Coil Services

August 02, 2013 18:03 ET

Xtreme Drilling and Coil Services Announces Second Quarter 2013 Operating and Financial Results and Election of New Board Member

CALGARY, ALBERTA--(Marketwired - Aug. 2, 2013) - Xtreme Drilling and Coil Services ("Xtreme" or the "Company") (TSX:XDC) announces summary results for the three and six months ended June 30, 2013. It is anticipated that filing will take place on SEDAR of the Condensed Interim Consolidated Financial Statements and Management's Discussion and Analysis on Friday, August 2, 2013.

Highlights - Q2 2013

  • Adjusted EBITDA was $16.8 million for the second quarter. This was a decrease of 12% over the previous quarter and an increase of 119% over the second quarter of 2012. The decrease in adjusted EBITDA in the quarter was due to Canadian seasonality and extremely wet weather in North Dakota which resulted in a higher number of stand-by and moving days than the first quarter. The decrease was mitigated by US XSR which had higher utilization and an increase in operating margin.

  • Revenue was $53.2 million in the second quarter of 2013 or a decrease of 2% over the previous quarter. The decrease in revenue for the quarter was a function of fewer operating days. Revenue per operating day was essentially flat at approximately $27,900.

  • The Company had 1,911 operating days, or 38 fewer days, in the second quarter of 2013, than the first quarter of 2013. This resulted in a utilization rate of 78% for the fleet of 21 XDR drilling rigs and 7 XSR coiled tubing units.

    The drilling segment achieved utilization of 85% on 1,621 operating days. This is comprised of a 92% utilization rate in the US XDR fleet and 41% for the Canadian XDR rigs. For the quarter, the coil services segment achieved utilization of 53% on 290 operating days. This is comprised of a 99% utilization rate on the two XSR units in Saudi Arabia and a 30% utilization rate on the four available XSR units in the US. In the US only two units were actively marketed until the company deployed a third XSR unit during the last week of June. The utilization on the two active XSR rigs was 60% for the quarter. The fourth XSR unit is anticipated to be deployed later in 2013.

  • Net Income of $0.2 million, less amount attributable to non-controlling interest of $0.3 million, for net loss attributable to the owners of the parent of $0.1 million for the second quarter of 2013, or $.00 per fully diluted share. This is net of a foreign exchange loss of $3.3 million during the quarter. Excluding this charge net income, would have been approximately $3.5 million or $.04 per share.

  • The Company paid the remaining $5 million on the HSBC demand note during the quarter and paid down an additional $6.4 million of the operating line of credit, part of the Company's $150 million revolving line of credit. Net debt at quarter end was $128 million in Canadian Dollars ($121.7 million in USD) which is inclusive of $4.0 million in debt held in the Saudi Arabian joint venture. At quarter end all of the Company's debt was denominated in US dollars and translated for financial reporting purposes to Canadian Dollars. Xtreme exited the quarter with working capital of $30 million and a funded debt to EBITDA ratio of 2.16, which is well under the credit facility covenant level of 3.00. Capital expenditures totaled $9.1 million for the second quarter.

  • The Company received extensions on the two XSR units operating in Saudi Arabia for a two month period, with a two month renewal option, until such time as the pending long term contract is finalized. It is expected that the new contract will be completed and executed within the next 30 days. However, the increase in rates has been accepted by the customer and went into effect on July 28, 2013. In addition, the Company is currently in discussions to purchase the remaining 20% interest in the Saudi Arabian joint venture.

Election of a New Board Member

Shareholders approved the appointment of Mr. James Renfroe Jr. as the seventh member of the Board of Directors at the Special Meeting of Shareholders held on August 2, 2013. Of the 33,399,711 votes represented at the Special Meeting, Mr. Renfroe received 32,875,745 votes for (98.43%) and 523,966 votes withheld (1.57%). Mr. Renfroe is an independent businessman, and currently a non-executive Director of Expro Group, an international oilfield service company. Mr. Renfroe was previously the Senior Strategic Advisor to the CEO of GE Oil and Gas. Prior to that Mr. Renfroe was Executive Director and CEO of the Well Support Division of Wood Group, PLC, a multinational oil and gas services company. Mr. Renfroe has an extensive background in executive leadership, strategic planning, operations and business development having worked for Halliburton Company in various executive positions from 1974 to 2007. While working for Halliburton, Mr. Renfroe managed multiple product lines (globally) and participated in a number of structural changes and process improvements to enhance organizational effectiveness. He led acquisitions and divestitures, as well as strategy development.

Selected Quarterly Financial Information (unaudited)
Three months ended Jun 30, 2013 Mar 31, 2013 Dec 31, 2012 Sep 30, 2012
Revenue 53,268 54,182 51,852 48,910
Adjusted EBITDA 1 16,847 19,234 15,432 10,655
Adjusted EBITDA as a percentage of Revenue 32 35 30 22
Adjusted EBITDA per share 1 - basic ($) 0.21 0.24 0.19 0.16
Net income (loss) 218 4,343 4,888 (3,457 )
Net income (loss) per share - basic ($) 0.00 0.05 0.06 (0.06 )
Capital assets 431,294 417,431 415,354 425,364
Total assets 520,326 508,823 506,551 511,279
Net debt 2 127,977 130,014 141,841 119,759
Operating days 1,911 1,949 1,891 1,742
Utilization (percentage) - XDR 85 89 85 86
Utilization (percentage)- XSR 53 49 47 36
Utilization (percentage) - Total 78 80 77 74
Weighted average rigs in service 28.0 28.0 26.8 26.0
Total rigs, end of quarter 28 28 28 28
Jun 30, 2012 Mar 31, 2012 Dec 31, 2011 Sep 30, 2011
Revenue 40,180 38,446 32,552 26,659
Adjusted EBITDA 1 7,695 7,908 6,433 6,017
Adjusted EBITDA as a percentage of Revenue 19 21 20 23
Adjusted EBITDA per share 1 - basic ($) 0.12 0.12 0.10 0.09
Net (loss) income (2,193 ) 1,207 (1,025 ) (305 )
Net (loss) income per share - basic ($) (0.03 ) 0.02 (0.02 ) (0.00 )
Capital assets 425,397 379,710 348,148 308,465
Total assets 512,254 464,453 424,921 385,405
Net debt 2 144,039 109,546 75,563 35,102
Operating days 1,494 1,423 1,246 1,137
Utilization (percentage) - XDR 74 84 73 69
Utilization (percentage)- XSR 57 56 97 100
Utilization (percentage) - Total 70 79 75 73
Weighted average rigs in service 23.4 19.8 18.0 17.0
Total rigs, end of quarter 27 18 18 17
1 Adjusted EBITDA. See Reconciliation of adjusted EBITDA below
2 Total debt less cash

Excerpt from Management's Discussion and Analysis

For the three and six months ended June 30, 2013

Outlook

During the second quarter of 2013 the Company continued to focus on improving financial and operating performance. Utilization in the US XDR drilling fleet remained strong at 92%. It is anticipated that the only idle US rig will begin work by the end of August. This should increase the utilization for the US drilling fleet in the third quarter. Along with this we anticipate slightly higher repair and maintenance expenses in the third quarter related to preparing the rig for work. The core US drilling markets of the Bakken and greater DJ Basin remain active as rig counts have increased by 12% and 27% respectively in 2013. We have a number of contracts coming up for renewal in late 2013 and early 2014 but due to the fact that our entire US drilling fleet is operating in these two active markets we are confident in our ability to roll or reposition our expiring contracts. Currently, two of the three XDR rigs that were up for renewal in the third quarter have been extended into early 2014. As new budgets are approved at year end we are optimistic that these rigs will be re-contracted beyond their current term.

In Canada the three XDR rigs that operated in the second quarter had a 41% utilization rate which was significantly higher than the CAODC industry average of 18%. The Canadian market continues to face head winds and as such we anticipate that utilization in our Canadian XDR division will be in the 70-75% range over the second half of the year. Margins remain under pressure based on lower day rates. During the second quarter revenue per operating day was down by 30%. We anticipate it will bounce back in the second half of the year but below 2012 levels.

The US XSR business had an increase in utilization and operating margin during the second quarter. The division set new records for reach with 2 5/8 inch coiled tubing in the Eagle Ford by completing wells with horizontals in excess of 10,400 feet with total measured depth of 20,400 feet. We have now demonstrated that with Xtreme technology customers can make it to the toe of the longest reach laterals that are being drilled in the Eagle Ford. Due to this we have begun to clearly differentiate our service offerings from commoditized 2 inch coiled tubing competitors. We are excited about the market and potential to put our fourth unit to work in later in 2013.

The Saudi XSR business maintained strong utilization and margins during the second quarter. The current contract, which was a two year contracts with a 1 year renewal, finished up after quarter end with impressive operational performance for the customer. With that, the units were extended for two months while the longer term extensions are finalized. A new rate structure became effective with the recent renewals and is expected to increase operating margins. Management is currently pursuing new opportunities in the region.

In the second half of 2013 management will continue to focus on de-leveraging the balance sheet and maximizing operating performance and cash flow. This should provide Xtreme the flexibility to pursue opportunities in the ultra-deep long reach re-entry and completion market with our leading edge patented coil tubing technology in 2014.

Conference Call Details

Xtreme has scheduled a conference call on Tuesday, August 6, 2013, beginning promptly at 10:00 am MDT (11:00 am CDT; 12:00 am EDT) to discuss the 2013 second quarter financial and operating results. Tom Wood, Chief Executive Officer, will host the conference call with participation from Matt Porter, Chief Financial Officer.

Conference operator dial‐in numbers

To participate in the conference call, please dial in as follows approximately ten minutes before the start time in your time zone.

+1 800-766-6630 (North America Toll‐Free) or +1 416‐695-6622 (Alternate)

An audio replay of the call will be available until Tuesday, August 13, 2013. To access the replay, call +1 800‐408‐3053 or +1 905‐694‐9451 and enter pass code 4828220.

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 believes expectations reflected in these FLS are reasonable, readers should not place undue reliance on them because Xtreme 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 considers the assumptions used to prepare this news release reasonable, based on information available to management as of August 2, 2013, 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 in accordance with normal industry practices; and management of accounts receivable in direct relation to revenue generation.

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 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 Drilling and Coil Services

Xtreme Drilling and Coil Services Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification drilling rigs and coiled tubing well service units featuring leading-edge proprietary technology including AC high capacity coil injectors, deep re-entry drilling capability, modular transportation systems and continuous integration of in-house advances in methodologies.

Currently Xtreme operates two service lines: Drilling Services and Coil Services under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada, the United States and Saudi Arabia. For more information about the Company, please visit www.xtremecoil.com.

Xtreme Drilling and Coil Services Corp.
Condensed Interim Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
(unaudited)
Jun 30, 2013 Dec 31, 2012 Jan 1, 2012
Assets
Current assets
Cash and cash equivalents 8,979 5,921 6,873
Accounts receivable 49,193 44,878 46,653
Other receivables 4,403 2,975 1,636
Prepaid expenses and other 1,462 2,047 2,114
Assets held for sale - 9,308 -
Income tax recoverable 369 368 928
Inventory 8,273 6,474 6,470
72,679 71,971 64,674
Non-current assets
Deferred tax asset 12,285 15,006 7,576
Property and equipment 431,294 415,354 348,148
Intangible assets 4,068 4,220 4,523
Total Assets 520,326 506,551 424,921
Liabilities and Equity
Current liabilities
Bank indebtedness - 7,834 -
Accounts payable and accrued liabilities 25,425 27,904 26,902
Current portion of long-term debt 17,299 14,201 500
42,724 49,939 27,402
Long-term liabilities
Long-term debt 119,657 125,727 81,936
Total Liabilities 162,381 175,666 109,338
Equity attributable to owners of the parent
Share capital 327,184 327,197 310,296
Share option reserve 12,002 11,572 10,338
Accumulated deficit (1,510 ) (5,312 ) (4,325 )
Foreign currency translation reserve 10,237 (11,314 ) (8,209 )
347,913 322,143 308,100
Non-controlling interest 10,032 8,742 7,483
357,945 330,885 315,583
Total Liabilities and Equity 520,326 506,551 424,921
Xtreme Drilling and Coil Services Corp.
Condensed Interim Consolidated Statements of Income
For the three and six months ended June 30, 2013 and 2012
(in thousands of Canadian dollars, except share and per share data)
(unaudited)
Three months ended Six months ended
June 30, 2013 June 30, 2012 June 30, 2013 June 30, 2012
Revenue 53,268 40,180 107,450 78,626
Expenses
Operating expenses 33,560 29,592 65,957 56,927
General and administrative expenses 2,861 2,893 5,412 6,096
Depreciation of property and equipment 9,098 5,632 17,641 10,599
Amortization of intangibles 76 76 152 152
Stock-based compensation 210 522 430 1,031
Foreign exchange loss 3,272 1,986 5,145 377
(Loss) gain on sale of equipment (117 ) (3 ) 31 8
Other expenses 21 45 57 87
Interest expense 1,664 1,517 3,783 2,998
Income (loss) before tax for the period 2,623 (2,080 ) 8,842 351
Tax expense (recovery)
Current 884 939 1,540 1,429
Deferred 1,521 (826 ) 2,741 (93 )
Total tax expense 2,405 113 4,281 1,336
Net income (loss) for the period 218 (2,193 ) 4,561 (985 )
Net income (loss) attributable to
Owners of the parent (104 ) (2,606 ) 3,802 (1,664 )
Non-controlling interest 322 413 759 679
218 (2,193 ) 4,561 (985 )
Net income (loss) per common share attributable to equity owners of the parent
- basic 0.00 (0.04 ) 0.05 (0.03 )
- diluted 0.00 (0.04 ) 0.05 (0.03 )
Weighted average number of common shares
- basic 80,790,315 65,781,642 80,790,315 65,742,278
- diluted 81,200,643 65,910,670 81,098,340 65,918,381
Xtreme Drilling and Coil Services Corp.
Reconciliation of Adjusted EBITDA
For the three and six months ended June 30, 2013 and 2012
(in thousands of Canadian dollars, except per share data)
(unaudited)
Three months ended Six months ended
Jun 30, 2013 Jun 30, 2012 Jun 30, 2013 Jun 30, 2012
Net income (loss) 218 (2,193 ) 4,561 (985 )
Tax expense 2,405 113 4,281 1,336
Interest expense 1,664 1,517 3,783 2,998
(Gain) loss on sale of equipment (117 ) (3 ) 31 8
Other expense 21 45 57 87
Foreign exchange loss 3,272 1,986 5,145 377
Stock-based compensation 210 522 430 1,031
Amortization of intangibles 76 76 152 152
Depreciation of property and equipment 9,098 5,632 17,641 10,599
Adjusted EBITDA 16,847 7,695 36,081 15,603
Adjusted EBITDA per share ($) 0.21 0.12 0.45 0.24
Adjusted EBITDA attributable to:
Owners of the parent 16,283 7,169 34,910 14,704
Non-controlling interest 564 526 1,171 899
16,847 7,695 36,081 15,603

Contact Information

  • Xtreme Drilling and Coil Services Corp.
    Matt Porter
    Chief Financial Officer
    +1 281 994 4604

    Xtreme Drilling and Coil Services Corp.
    16285 Park Ten Place, Suite 650
    Houston, TX 77084
    ir@xtremecoil.com
    www.xtremecoil.com