SECOND QUARTER HIGHLIGHTS
- Revenue for the second quarter of 2020 was
$194.8 million , a 48 percent decrease from the second quarter of 2019 revenue of$377.5 million . - Revenue by geographic area:
Canada -$17.0 million , nine percent of total;United States -$128.6 million , 66 percent of total; and- International -
$49.2 million , 25 percent of total. - Canadian drilling recorded 377 operating days in the second quarter of 2020, a 71 percent decrease from 1,317 operating days in the second quarter of 2019. Canadian well servicing recorded 3,595 operating hours in the second quarter of 2020, a 66 percent decrease from 10,700 operating hours in the second quarter of 2019.
United States drilling recorded 2,214 operating days in the second quarter of 2020, a 66 percent decrease from 6,451 operating days in the second quarter of 2019.United States well servicing recorded 19,363 operating hours in the second quarter of 2020, a 33 percent decrease from 28,960 operating hours in the second quarter of 2019.- International drilling recorded 704 operating days in the second quarter of 2020, a 41 percent decrease from 1,195 operating days recorded in second quarter of 2019.
- Adjusted EBITDA for the second quarter of 2020 was
$58.1 million , a 43 percent decrease from Adjusted EBITDA of$101.8 million for the second quarter of 2019. - Funds flow from operations for the second quarter of 2020 decreased 66 percent to
$26.3 million from$76.8 million in the second quarter of the prior year. - During the second quarter of 2020, the Company received a
$3.7 million Canada Emergency Wage Subsidy ("CEWS") from theGovernment of Canada and a$1.4 million wage subsidy from the Government ofAustralia . The wage subsidies received partially offset the decrease in Adjusted EBITDA and net loss attributable to common shareholders. - During the second quarter of 2020, the Company recognized US
$3.3 million of idle but contracted rig revenue and US$13.2 million of contract cancellation fees inthe United States . As the Company moves through the balance of 2020 and into 2021 the amount of contract cancellation fees and idle but contracted revenue will reduce quarter-over-quarter. - Net capital proceeds for the second quarter of 2020 were
$3.7 million consisting$13.3 million in maintenance capital, offset by proceeds of$17.0 million from disposals. Planned capital expenditures for the 2020 year remain at$50.0 million , of which approximately$40.0 million will be maintenance capital. - General and administrative expense decreased 33 percent year-over-year and nine percent quarter-over-quarter.
- Over the second quarter of 2020, US
$57.0 million face value of Senior Notes were repurchased by the Company in the open market for cancellation, recognizing a gain of$52.0 million . Subsequent toJune 30, 2020 , the Company repurchased US$5.0 million face value of Senior Notes, in the open market, for cancellation. A gain on repurchase of$4.0 million (US$2.9 million ) will be recognized in the third quarter of 2020. - Total debt for the second quarter of 2020 decreased year-over-year by
$107.3 million to$1,555.3 million as ofJune 30, 2020 from$1,662.6 million as atJune 30, 2019 . The decrease in aggregate debt was partially offset by$30.1 million due to foreign currency exchange fluctuations. - The Company's available liquidity consisting of cash and available borrowings under its revolving credit facility was
$225.7 million atJune 30, 2020 .
OVERVIEW
Revenue for the second quarter of 2020 was
Adjusted EBITDA totaled
Net loss attributable to common shareholders for the second quarter of 2020 was
During the second quarter of 2020, the Company received a
Funds flow from operations decreased 66 percent to
On
Over the course of the second quarter, stay-at-home related restrictions started to ease globally, increasing the demand for crude oil and natural gas. Furthermore, OPEC+ nations curtailed crude oil supply in addition to producer led production curtailments over the second quarter. Supply and production curtailments in combination with demand recovery have materially improved crude oil commodity prices. While commodity prices are down year-over-year and there continues to be a strong supply of crude oil in the market, industry fundamentals improved somewhat over the course of the quarter.
Early in
The Company's operating days were lower in the second quarter of 2020 when compared to the same period in 2019 as customers quickly responded to the steep declines in commodity prices and an uncertain industry outlook by curtailing capital expenditures and drilling programs. The strengthening year-over-year of
Working capital at
This news release contains "forward-looking information and statements" within the meaning of applicable securities legislation. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Advisory Regarding Forward-Looking Statements" later in this news release. This news release contains references to Adjusted EBITDA and Adjusted EBITDA per common share. These measures do not have any standardized meaning prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies. The non-GAAP measures included in this news release should not be considered as an alternative to, or more meaningful than, the IFRS measure from which they are derived or to which they are compared. See "Non-GAAP Measures" later in this news release.
FINANCIAL AND OPERATING HIGHLIGHTS
(Unaudited, in thousands of Canadian dollars, except per common share data and operating information)
Three months ended | Six months ended | |||||||||||
2020 | 2019 | % change | 2020 | 2019 | % change | |||||||
Revenue 1 | $ | 194,759 | $ | 377,496 | (48) | $ | 578,620 | $ | 822,516 | (30) | ||
Adjusted EBITDA 1,2 | 58,060 | 101,827 | (43) | 149,307 | 219,120 | (32) | ||||||
Adjusted EBITDA per common share 1,2 | ||||||||||||
Basic | (44) | (34) | ||||||||||
Diluted | (44) | (34) | ||||||||||
Net loss attributable to common shareholders | (17,077) | (31,173) | 45 | (46,327) | (53,521) | 13 | ||||||
Net loss per common share | ||||||||||||
Basic | 50 | 18 | ||||||||||
Diluted | 50 | 18 | ||||||||||
Cash provided by operating activities 1 | 127,432 | 81,620 | 56 | 190,164 | 167,598 | 13 | ||||||
Funds flow from operations 1 | 26,338 | 76,779 | (66) | 110,833 | 197,198 | (44) | ||||||
Funds flow from operations per common share 1 | ||||||||||||
Basic | (67) | (46) | ||||||||||
Diluted | (67) | (46) | ||||||||||
Total long term debt | 1,555,274 | 1,662,628 | (6) | 1,555,274 | 1,662,628 | (6) | ||||||
Weighted average common shares - basic (000s) | 162,729 | 158,229 | 3 | 162,728 | 157,656 | 3 | ||||||
Weighted average common shares - diluted (000s) | 162,791 | 158,290 | 3 | 162,857 | 157,716 | 3 | ||||||
Drilling | 2020 | 2019 | % change | 2020 | 2019 | % change | ||||||
Number of marketed rigs 3 | ||||||||||||
101 | 118 | (14) | 101 | 118 | (14) | |||||||
122 | 134 | (9) | 122 | 134 | (9) | |||||||
International 5 | 43 | 42 | 2 | 43 | 42 | 2 | ||||||
Total | 266 | 294 | (10) | 266 | 294 | (10) | ||||||
Operating days 6 | ||||||||||||
377 | 1,317 | (71) | 3,479 | 4,378 | (21) | |||||||
2,214 | 6,451 | (66) | 7,355 | 13,108 | (44) | |||||||
International 5 | 704 | 1,195 | (41) | 2,142 | 2,524 | (15) | ||||||
Total | 3,295 | 8,963 | (63) | 12,976 | 20,010 | (35) | ||||||
Well Servicing | 2020 | 2019 | % change | 2020 | 2019 | % change | ||||||
Number of rigs | ||||||||||||
52 | 55 | (5) | 52 | 55 | (5) | |||||||
47 | 47 | — | 47 | 47 | — | |||||||
Total | 99 | 102 | (3) | 99 | 102 | (3) | ||||||
Operating hours | ||||||||||||
3,595 | 10,700 | (66) | 15,827 | 23,498 | (33) | |||||||
19,363 | 28,960 | (33) | 50,570 | 57,325 | (12) | |||||||
Total | 22,958 | 39,660 | (42) | 66,397 | 80,823 | (18) |
1. | Comparative revenue, Adjusted EBITDA, Adjusted EBITDA per common share, cash provided by operating activities, funds flow from operations and funds flow from operations per common share have been revised to conform with current year's presentation. |
2. | Refer to Adjusted EBITDA calculation in Non-GAAP Measures |
3. | Total owned rigs: |
4. | Excludes coring rigs. |
5. | Includes workover rigs and excludes former joint venture drilling rigs. |
6. | Defined as contract drilling days, between spud to rig release. |
FINANCIAL POSITION AND CAPITAL EXPENDITURES HIGHLIGHTS
As at ($ thousands) |
|
| December |
Working capital1 | 131,761 | 182,813 | 126,987 |
Cash | 102,655 | 39,705 | 28,408 |
Long-term debt | 1,555,274 | 1,662,628 | 1,581,529 |
Total long-term financial liabilities | 1,564,652 | 1,681,252 | 1,591,047 |
Total assets | 3,387,104 | 3,717,247 | 3,470,601 |
Long-term debt to long-term debt plus equity ratio | 0.52 | 0.51 | 0.52 |
1 See Non-GAAP Measures section. |
Three months ended | Six months ended | |||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | ||
Capital expenditures | ||||||||
Upgrade/growth | 48 | 25,105 | nm | 10,013 | 53,650 | (81) | ||
Maintenance | 13,191 | 6,807 | 94 | 29,658 | 19,628 | 51 | ||
Proceeds from disposals or property and equipment | (16,985) | (27,898) | (39) | (21,150) | (29,620) | (29) | ||
Net capital expenditures | (3,746) | 4,014 | nm | 18,521 | 43,658 | (58) | ||
nm - calculation not meaningful |
REVENUE AND OILFIELD SERVICES EXPENSE
Three months ended | Six months ended | |||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | ||
Revenue 1 | ||||||||
17,012 | 50,598 | (66) | 114,149 | 157,020 | (27) | |||
128,591 | 261,186 | (51) | 343,138 | 534,544 | (36) | |||
International | 49,156 | 65,712 | (25) | 121,333 | 130,952 | (7) | ||
Total revenue | 194,759 | 377,496 | (48) | 578,620 | 822,516 | (30) | ||
Oilfield services expense 1 | 129,955 | 266,253 | (51) | 412,777 | 581,940 | (29) | ||
1. Comparative revenue and oilfield services expense have been revised to conform with current year's presentation. |
Revenue for the three months ended
The decrease in total revenue during the first half of 2020 was primarily due to the oil price and market share war between certain crude oil producing nations followed by the significant adverse impact of the COVID-19 pandemic on the oil and natural gas industry. The fallout from the pandemic has led to a drop in demand for crude oil and natural gas, further challenging an already over-supplied commodity market. The steep declines in demand and continued oversupply have resulted in a significant activity slowdown for oilfield services, particularly in
The financial results from the Company's
CANADIAN OILFIELD SERVICES
Revenue decreased 66 percent to
The Company's Canadian drilling operations recorded 377 operating days in the second quarter of 2020, compared to 1,317 operating days for the second quarter of 2019, a decrease of 71 percent. For the six months ended
The financial results for the Company's Canadian operations decreased during the first half of 2020 primarily due to the oil price war and the impact of the COVID-19 pandemic on the global oil and natural gas industry as described above.
The Company's
Drilling rig operating days decreased to 2,214 operating days in the second quarter of 2020 from 6,451 operating days in the second quarter of 2019, and to 7,355 operating days in first six months of 2020 from 13,108 operating days in the first six months of 2019. Well servicing activity, expressed in operating hours, decreased by 33 percent in the second quarter of 2020 to 19,363 operating hours from 28,960 operating hours in the second quarter of 2019. For the six months ended
Overall operating results for the Company's
INTERNATIONAL OILFIELD SERVICES
The Company's international operations recorded revenue of
International operating days for the three months ended
Overall international operating results were also negatively impacted by the oil price war and the significant impact of the global COVID-19 pandemic, resulting in a decrease in global oil demand and oversupply of oil and natural gas.
JOINT VENTURE
Amounts below are presented at 100 percent of the value included in the statement of operations and comprehensive (loss) income for
Subsequent to the quarter, the Company completed the acquisition of Halliburton's 40 percent ownership interest of the TDI joint venture. The 40 percent ownership interest, inclusive of working capital in TDI joint venture, was purchased for US
Three months ended | Six months ended | ||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |
Revenue | 18,801 | 13,179 | 43 | 35,656 | 23,383 | 52 | |
Net income | (211) | 3,868 | nm | (2,975) | 1,161 | nm | |
Drilling operating days | 266 | 82 | nm | 487 | 205 | nm | |
nm - calculation not meaningful |
For the three months ended
DEPRECIATION
Three months ended | Six months ended | ||||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |||
Depreciation | 92,165 | 89,030 | 4 | 181,950 | 177,197 | 3 |
Depreciation expense totaled
GENERAL AND ADMINISTRATIVE
Three months ended | Six months ended | ||||||||||||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |||||||||||
General and administrative | 10,741 | 15,978 | (33) | 22,545 | 30,015 | (25) | |||||||||||
% of revenue | 5.5 | 4.2 | 3.9 | 3.6 | |||||||||||||
General and administrative expenses decreased 33 percent to
In light of the current operating environment, the Company took further steps to reduce overhead costs by reducing the salaries of employees. The Company's named executive officers salaries were reduced by 40 percent for the Chairman, 20 percent for the President and Chief Operating Officer and 12.5 percent for the other named executive officers, all effective April 1, 2020. In addition, the annual base cash and equity retainers for independent members of the Board of Directors have been reduced, also effective April 1, 2020, by 20 and 40 percent respectively. Such reductions reflect the Company's belief in the importance of continued cost control in light of the current oilfield services industry outlook. The Company has and will continue to consider additional means of reducing overhead and operating costs.
RESTRUCTURING
Three months ended | Six months ended | ||||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |||
Restructuring | 6,509 | 915 | nm | 7,386 | 9,397 | (21) | |||
nm - calculation not meaningful |
Restructuring expense totaled
FOREIGN EXCHANGE AND OTHER (GAIN) LOSS
Three months ended | Six months ended | |||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | ||
Foreign exchange and other (gain) loss | (4,426) | (2,627) | 68 | 4,660 | 7,733 | (40) |
Included in this amount is the impact of foreign currency fluctuations in the Company's subsidiaries that have functional currencies other than the Canadian dollar.
GAIN ON REPURCHASE OF UNSECURED SENIOR NOTES
Three months ended | Six months ended | |||||||||||||||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | ||||||||||||||
Gain on repurchase of unsecured Senior Notes | (52,023) | (650) | nm | (63,517) | (650) | nm | ||||||||||||||
nm - calculation not meaningful |
For the three months ended
For six months ended
Subsequent to
LOSS (GAIN) ON ASSET SALE
Three months ended | Six months ended | ||||||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |||||
Loss (gain) on asset sale | 3,437 | (9,824) | nm | 3,437 | (9,824) | nm | |||||
nm - calculation not meaningful |
During the second quarter of 2020, the Company finalized the sale of the land and building that was classified on its balance sheet as an asset held for sale. The net proceeds received were
FINANCING CHARGES
Three months ended | Six months ended | ||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |
Interest expense | 26,976 | 33,712 | (20) | 58,846 | 67,820 | (13) | |
Accretion of deferred financing charges | 2,971 | 6,297 | (53) | 5,943 | 8,535 | (30) | |
Financing charges | 29,947 | 40,009 | (25) | 64,789 | 76,355 | (15) |
Financing charges were incurred on the Company's Credit Facility,
Financing charges decreased by
The Company's blended interest rate on its outstanding debt for the 2020 year will be approximately seven percent. The current capital structure consisting of the Credit Facility and the Senior Notes allows the Company to utilize funds flow generated to reduce debt in the near term with greater flexibility than a more non-callable weighted capital structure.
INCOME TAXES (RECOVERY)
Three months ended | Six months ended | ||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |
Current tax (recovery) | (11) | 460 | nm | 449 | 901 | (50) | |
Deferred tax (recovery) | (7,431) | 9,242 | nm | (10,855) | (2,451) | nm | |
Total income tax (recovery) | (7,442) | 9,702 | nm | (10,406) | (1,550) | nm | |
Effective income tax rate (%) | 30.3 | 44.1 | (31) | 18.7 | 2.8 | nm | |
nm - calculation not meaningful |
The effective income tax rate for the three months ended
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL
($ thousands, except per common share data) | Three months ended | Six months ended | |||||
2020 | 2019 | % change | 2020 | 2019 | % change | ||
Cash provided by operating activities 1 | 127,432 | 81,620 | 56 | 190,164 | 167,598 | 13 | |
Funds flow from operations 1 | 26,338 | 76,779 | (66) | 110,833 | 197,198 | (44) | |
Funds flow from operations per common share 1 | (67) | (46) | |||||
Working capital 2 | 131,761 | 126,987 | 4 | 131,761 | 126,987 | 4 |
1 | Comparative cash provided by operating activities, funds flow from operations and funds flow from operations per common share have been revised to conform with current year's presentation. |
2 | Comparative figure as at |
During the three months ended
At
INVESTING ACTIVITIES
Three months ended | Six months ended | ||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |
Purchase of property and equipment | (13,239) | (31,912) | (59) | (39,671) | (73,278) | (46) | |
Proceeds from disposals of property and equipment | 16,985 | 27,898 | (39) | 21,150 | 29,620 | (29) | |
Acquisition of minority interest | — | — | nm | — | (49,214) | nm | |
Net change in non-cash working capital | (3,504) | (5,426) | (35) | 4,249 | 11,000 | (61) | |
Cash provided by (used in) investing activities | 242 | (9,440) | nm | (14,272) | (81,872) | (83) | |
nm - calculation not meaningful |
Net proceeds of property and equipment for the second quarter of 2020 totaled
FINANCING ACTIVITIES
Three months ended | Six months ended | ||||||
($ thousands) | 2020 | 2019 | % change | 2020 | 2019 | % change | |
Proceeds from long-term debt | 41,163 | 998,265 | (96) | 94,289 | 2,224,231 | (96) | |
Repayments of long-term debt | (50,005) | (1,099,564) | (95) | (105,477) | (2,252,107) | (95) | |
Lease obligation principal repayments | (2,957) | (2,357) | 25 | (5,627) | (3,616) | 56 | |
Interest paid | (49,177) | (34,661) | nm | (61,144) | (81,729) | (85) | |
Purchase of common shares held in trust | 667 | 553 | 21 | (556) | (523) | 6 | |
Cash dividends | (9,787) | (11,588) | (16) | (19,574) | (30,437) | (36) | |
Net change in non-cash working capital | — | (2,380) | nm | — | 18,299 | nm | |
Cash used in financing activities | (70,096) | (151,732) | (54) | (98,089) | (125,882) | (22) | |
nm - calculation not meaningful |
The Company's available bank facilities consist of a
The Company may at any time and from time-to-time acquire additional Senior Notes for cancellation by means of open market purchases, negotiated transactions or otherwise. As previously noted, the Company has purchased US
Covenants
The following is a list of the Company's currently applicable covenants and the calculations as at
Covenant | ||
The Credit Facility | ||
Consolidated Total Debt to Consolidated EBITDA1 | ≤ 5.00 | 4.18 |
Consolidated EBITDA to Consolidated Interest Expense1,2 | ≥ 2.50 | 2.93 |
Consolidated Senior Debt to Consolidated EBITDA1,3 | ≤ 2.50 | 1.98 |
1 | Please refer to Non-GAAP Measures for Consolidated EBITDA definition. |
2 | Consolidated Interest Expense is defined as all interest expense calculated on twelve month rolling consolidated basis excluding amortized finance cost and interest expense on capital building lease. |
3 | Consolidated Senior Debt is defined as Consolidated Total Debt minus Subordinated Debt. |
As at June 30, 2020 the Company was in compliance with all covenants related to the Credit Facility.
The Credit facility
The Credit Facility agreement, available on SEDAR, requires that the Company comply with certain covenants including Consolidated Total Debt to Consolidated EBITDA, Consolidated Senior Debt to Consolidated EBITDA and Consolidated EBITDA to Consolidated Interest Expense as detailed above.
The Credit Facility contains certain covenants that place restrictions on the Company's ability to create, incur or assume additional indebtedness; change the Company's primary business; enter into mergers or amalgamations; and to dispose of property.
Subject to market conditions during the remainder of 2020, it is likely that the Company will be required to enter into discussion with its Credit Facility syndicate to amend covenants under its Credit Facility, which otherwise may be susceptible to breach in the latter half of 2020.
The Senior Notes
The indenture governing the Senior Notes, which is available on SEDAR, contains certain restrictions and exemptions on the Company's ability to pay dividends, purchase and redeem shares and subordinated debt of the Company, and make certain restricted investments. Limitations on these restrictions are tempered by the existence of a number of exceptions to the general prohibition, including baskets allowing for restricted payments.
The indenture also restricts the ability to incur additional indebtedness if the Fixed Charge Coverage Ratio determined on a pro forma basis for the most recently ended four fiscal quarter period for which internal financial statements are available is not at least 2.0 to 1.0. As at
NEW BUILDS AND MAJOR RETROFITS
As at
OUTLOOK
Industry Overview
The outlook for the oil field service industry remains uncertain as the macroeconomic environment for the oil and natural gas industry remains fluid. The global COVID-19 pandemic and associated mitigation strategies significantly impacted energy demand, contributing to a commodity oversupply and storage build-up in the short term. The imbalance between crude oil and natural gas supply and demand resulted in deteriorating commodity prices exiting the first quarter and into the second quarter of 2020 with the benchmark price of West Texas Intermediate ("WTI") averaging US
As global economies started to lift lock-down restrictions related to COVID-19, demand for crude oil and natural gas has steadily improved. In addition, many energy producers reduced crude oil and natural gas production along with OPEC+ nations. Global demand recovery coupled with reduced production and supply, resulted in meaningful improvements in crude oil commodity prices over the latter half of the second quarter 2020, with WTI averaging approximately US
Oil and natural gas producers have continued to adjust to the improving commodity price environment by selectivity restoring curtailed production while remaining committed to reducing planned capital expenditures. Furthermore, OPEC+ recently decreased supply curtailments, increasing global crude oil supply. While industry fundamentals have improved, the current environment has led to significant and downward pressure on the demand for the Company's services over the short term, resulting in decreased utilization across the Company's global fleet over the second quarter.
In the short term, we expect continued uncertainty with the macroeconomic conditions including the pathway of the COVID-19 pandemic, the degree and impact of COVID-19 mitigation strategies on demand for crude oil and natural gas, commodity prices and the demand for the oil field services. The Company has responded to the current operating environment with strict and opportunistic capital allocation and significant cost reductions. The Company's expected capital expenditures for 2020 remain at
Subsequent to the second quarter, the Company acquired the remaining 40 percent ownership in the joint venture operating under the name
The Company remains committed to debt retirement, balance sheet and liquidity preservation and capital efficiency. Furthermore, the Company continues to monitor the current macroeconomic environment and will continue to take additional steps to mitigate the negative impacts of these events to be well positioned to take advantage of opportunities when they may occur.
Canadian Activity
Canadian activity, representing nine percent of our business, decreased significantly over the second quarter due to seasonal spring break-up, exacerbated by COVID-19 related industry impacts. We expect activity to improve modestly with the commodity price improvement into the latter half of the year as we exit spring break-up and enter the winter drilling season.
Of our 101 marketed Canadian drilling rigs, approximately 13 percent are engaged under term contracts of various terms. Approximately 62 percent of our contracted rigs have a remaining term of six months or longer, although they may be subject to early terminations.
United States Activity
Of 122 marketed
International Activity
International activity, representing 25 percent of our business, decreased over the second quarter and has stabilized entering the third quarter. Latin American operations decreased over the quarter with
Of 48 marketed international drilling rigs, including the former five joint venture drilling rigs now wholly owned, approximately 28 percent are engaged under term contracts of various terms. Approximately 85 percent of our contracted rigs have a remaining term of six months or longer, although they may be subject to early terminations.
RISK AND UNCERTAINTIES
This document contains forward-looking statements based upon current expectations that involve a number of business risks and uncertainties. The factors that could cause results to differ materially include, but are not limited to, the impact of the COVID-19 virus, political, economic and market conditions, crude oil and natural gas prices, foreign currency fluctuations, weather conditions, the Company's defense of lawsuits and the ability of oil and gas companies to pay accounts receivable balances and raise capital or other unforeseen conditions which could ongoing impact on the use of the services supplied by the Company. For a more detailed description of the risk factors and uncertainties that face the Company and the industry in which it operates, refer to the "Risks and Uncertainties" section of our current Management's Discussion & Analysis and the section titled "Risk Factors" in our current Annual Information Form.
CONFERENCE CALL
A conference call will be held to discuss the Company's second quarter 2020 results at
Consolidated Statements of Financial Position
As at |
| ||||
(Unaudited - in thousands of Canadian dollars) | |||||
Assets | |||||
Current Assets | |||||
Cash | $ | 102,655 | $ | 28,408 | |
Accounts receivable | 151,035 | 272,254 | |||
Inventories, prepaid and other | 50,524 | 47,292 | |||
Asset held for sale | — | 18,806 | |||
Income taxes receivable | 1,614 | 1,515 | |||
Total current assets | 305,828 | 368,275 | |||
Property and equipment | 2,812,411 | 2,855,223 | |||
Deferred income taxes | 139,742 | 121,748 | |||
Investment in joint ventures | 129,123 | 125,355 | |||
Total assets | $ | 3,387,104 | $ | 3,470,601 | |
Liabilities | |||||
Current Liabilities | |||||
Accounts payable and accruals | $ | 160,284 | $ | 216,719 | |
Cash dividends payable | — | 9,787 | |||
Share-based compensation | 237 | 297 | |||
Income taxes payable | 4,420 | 4,489 | |||
Current portion of lease obligation | 9,126 | 9,996 | |||
Total current liabilities | 174,067 | 241,288 | |||
Share-based compensation | 3,015 | 6,325 | |||
Long-term debt | 1,555,274 | 1,581,529 | |||
Lease obligations | 9,378 | 9,518 | |||
Deferred income taxes | 178,598 | 163,781 | |||
Non-controlling interest | 5,290 | 5,138 | |||
Total liabilities | 1,925,622 | 2,007,579 | |||
Shareholders' Equity | |||||
Shareholders' capital | 230,767 | 230,100 | |||
Contributed surplus | 23,441 | 23,966 | |||
Equity component of convertible debenture | 3,193 | 3,193 | |||
Accumulated other comprehensive income | 298,203 | 243,771 | |||
Retained earnings | 905,878 | 961,992 | |||
Total shareholders' equity | 1,461,482 | 1,463,022 | |||
Total liabilities and shareholders' equity | $ | 3,387,104 | $ | 3,470,601 |
Consolidated Statements of Loss
Three months ended | Six months ended | |||||||||||||
(Unaudited - in thousands of Canadian dollars, | ||||||||||||||
Revenue | $ | 194,759 | $ | 377,496 | $ | 578,620 | $ | 822,516 | ||||||
Expenses | ||||||||||||||
Oilfield services | 129,955 | 266,253 | 412,777 | 581,940 | ||||||||||
Depreciation | 92,165 | 89,030 | 181,950 | 177,197 | ||||||||||
General and administrative | 10,741 | 15,978 | 22,545 | 30,015 | ||||||||||
Restructuring | 6,509 | 915 | 7,386 | 9,397 | ||||||||||
Share-based compensation | 2,879 | 1,260 | (1,621) | 2,887 | ||||||||||
Foreign exchange and other (gain) loss | (4,426) | (2,627) | 4,660 | 7,733 | ||||||||||
Total expenses | 237,823 | 370,809 | 627,697 | 809,169 | ||||||||||
(Loss) income before financing charges and other | (43,064) | 6,687 | (49,077) | 13,347 | ||||||||||
Loss (gain) from investment in joint ventures | 127 | (2,307) | 1,785 | (295) | ||||||||||
Gain on repurchase of unsecured Senior Notes | (52,023) | (650) | (63,517) | (650) | ||||||||||
(Loss) gain on asset sale | 3,437 | (9,824) | 3,437 | (9,824) | ||||||||||
Financing charges | 29,947 | 40,009 | 64,789 | 76,355 | ||||||||||
Loss before income taxes | (24,552) | (20,541) | (55,571) | (52,239) | ||||||||||
Income tax (recovery) | ||||||||||||||
Current income tax (recovery) | (11) | 460 | 449 | 901 | ||||||||||
Deferred income tax (recovery) | (7,431) | 9,242 | (10,855) | (2,451) | ||||||||||
Total income tax (recovery) | (7,442) | 9,702 | (10,406) | (1,550) | ||||||||||
Net loss from continuing operations | $ | (17,110) | $ | (30,243) | $ | (45,165) | $ | (50,689) | ||||||
Loss from discontinued operations | $ | (127) | $ | (1,468) | $ | (1,254) | $ | (3,231) | ||||||
Net loss | $ | (17,237) | $ | (31,711) | $ | (46,419) | $ | (53,920) | ||||||
Net loss attributable to: | ||||||||||||||
Common shareholders | (17,077) | (31,173) | (46,327) | (53,521) | ||||||||||
Non-controlling interests | (160) | (538) | (92) | (399) | ||||||||||
(17,237) | (31,711) | (46,419) | (53,920) | |||||||||||
Net loss attributable to common shareholders | ||||||||||||||
Basic | $ | (0.10) | $ | (0.20) | $ | (0.28) | $ | (0.34) | ||||||
Diluted | $ | (0.10) | $ | (0.20) | $ | (0.28) | $ | (0.34) |
Consolidated Statements of Cash Flows
Three months ended | Six months ended | ||||||||
(Unaudited - in thousands of Canadian dollars) | |||||||||
Cash provided by (used in) | |||||||||
Operating activities | |||||||||
Net loss | $ | (17,237) | $ | (31,711) | $ | (46,419) | $ | (53,920) | |
Items not affecting cash | |||||||||
Depreciation | 92,165 | 89,030 | 181,950 | 177,197 | |||||
Loss (gain) from investment in joint ventures | 127 | (2,307) | 1,785 | (296) | |||||
Loss (gain) on asset sale | 3,437 | (9,824) | 3,437 | (9,824) | |||||
Gain on purchase of unsecured Senior Notes | (52,023) | (650) | (63,517) | (650) | |||||
Share-based compensation | 2,879 | 1,260 | (1,621) | 2,887 | |||||
Unrealized foreign exchange and other | (25,526) | (18,270) | (18,716) | 7,900 | |||||
Accretion of deferred financing charges | 2,971 | 6,297 | 5,943 | 8,535 | |||||
Interest expense | 26,976 | 33,712 | 58,846 | 67,820 | |||||
Deferred income tax | (7,431) | 9,242 | (10,855) | (2,451) | |||||
Funds flow from operations | 26,338 | 76,779 | 110,833 | 197,198 | |||||
Net change in non-cash working capital | 101,094 | 4,841 | 79,331 | (29,600) | |||||
Cash provided by operating activities | 127,432 | 81,620 | 190,164 | 167,598 | |||||
Investing activities | |||||||||
Purchase of property and equipment | (13,239) | (31,912) | (39,671) | (73,278) | |||||
Proceeds from disposals of property and equipment | 16,985 | 27,898 | 21,150 | 29,620 | |||||
Acquisition of minority interest | — | — | — | (49,214) | |||||
Net change in non-cash working capital | (3,504) | (5,426) | 4,249 | 11,000 | |||||
Cash (used in) provided by investing activities | 242 | (9,440) | (14,272) | (81,872) | |||||
Financing activities | |||||||||
Proceeds from long-term debt | 41,163 | 998,265 | 94,289 | 2,224,231 | |||||
Repayments of long-term debt | (50,005) | (1,099,564) | (105,477) | (2,252,107) | |||||
Lease obligation principal repayments | (2,957) | (2,357) | (5,627) | (3,616) | |||||
Interest paid | (49,177) | (34,661) | (61,144) | (81,729) | |||||
Purchase of common shares held in trust | 667 | 553 | (556) | (523) | |||||
Cash dividends | (9,787) | (11,588) | (19,574) | (30,437) | |||||
Net change in non-cash working capital | — | (2,380) | — | 18,299 | |||||
Cash used in financing activities | (70,096) | (151,732) | (98,089) | (125,882) | |||||
Net increase (decrease) in cash | 57,578 | (79,552) | 77,803 | (40,156) | |||||
Effects of foreign exchange on cash | (3,483) | (3,544) | (3,556) | (4,962) | |||||
Cash – beginning of period | 48,560 | 122,801 | 28,408 | 84,823 | |||||
Cash – end of period | $ | 102,655 | $ | 39,705 | $ | 102,655 | $ | 39,705 |
Non-GAAP Measures
Adjusted EBITDA, Adjusted EBITDA per common share and Consolidated EBITDA. These measures do not have any standardized meaning prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies. The non-GAAP measures included in this press release should not be considered as an alternative to, or more meaningful than, the IFRS measure from which they are derived or to which they are compared.
Adjusted EBITDA is used by management and investors to analyze the Company's profitability based on the Company's principal business activities prior to how these activities are financed, how assets are depreciated and amortized and how the results are taxed in various jurisdictions. Additionally, in order to focus on the core business alone, amounts are removed related to foreign exchange, share-based payment expense, impairment expenses, the sale of assets, restructuring costs, gain on repurchase of unsecured Senior Notes and fair value adjustments on financial assets and liabilities, as the Company does not deem these to relate to its core drilling and well services business. Adjusted EBITDA also takes into account the Company's portion of the principal activities of the joint venture arrangements by removing the loss (gain) from investments in joint ventures and including adjusted EBITDA from investments in joint ventures. Adjusted EBITDA is not intended to represent net loss as calculated in accordance with IFRS.
ADJUSTED EBITDA | ||||
Three months ended | Six months ended | |||
($ thousands) | 2020 | 2019 | 2020 | 2019 |
Loss before income taxes 1 | (24,552) | (20,541) | (55,571) | (52,239) |
Add-back/(deduct): | ||||
Financing charges | 29,947 | 40,009 | 64,789 | 76,355 |
Depreciation | 92,165 | 89,030 | 181,950 | 177,197 |
Restructuring | 6,509 | 915 | 7,386 | 9,397 |
Loss (gain) from investment in joint ventures | 127 | (2,307) | 1,785 | (295) |
Share-based compensation | 2,879 | 1,260 | (1,621) | 2,887 |
Loss (gain) on asset sale | 3,437 | (9,824) | 3,437 | (9,824) |
Gain on repurchase of unsecured Senior Notes 2 | (52,023) | (650) | (63,517) | (650) |
Foreign exchange and other (gain) loss | (4,426) | (2,627) | 4,660 | 7,733 |
Adjusted EBITDA from investment in joint ventures | 3,997 | 6,562 | 6,009 | 8,559 |
Adjusted EBITDA | 58,060 | 101,827 | 149,307 | 219,120 |
1 | Comparative loss before income taxes have been revised to conform with current year's presentation. |
2 | See "Financing Charges" section for definition of Senior Notes. |
Adjusted EBITDA from investment in joint ventures is used by management and investors to analyze the results generated by the Company's joint venture operations prior to how these activities are financed, how assets are depreciated and amortized and how the results are taxed in various jurisdictions. Additionally, in order to focus on its core drilling and well services business, amounts related to foreign exchange, dividend expense, dividend re-class, impairment adjustments to property and equipment, as well as preferred share valuation and the sale of assets are removed. Lastly, amounts recorded for the revaluation on the investment of the TDI joint venture are removed as these are non-cash items and unrelated to the operations of the business. Adjusted EBITDA from investments in joint ventures is not intended to represent net loss as calculated in accordance with IFRS.
Adjusted EBITDA from investment in joint ventures is calculated below:
Three months ended | Six months ended | |||
($ thousands) | 2020 | 2019 | 2020 | 2019 |
(Loss) gain from investment in joint ventures | (127) | 2,307 | (1,785) | 295 |
Add-back/(deduct): | ||||
TDI fair value adjustment | — | 650 | — | 650 |
Depreciation | 3,755 | 3,226 | 7,185 | 6,655 |
Foreign exchange and other loss (gain) | 138 | (19) | 240 | (24) |
Financing charge | 11 | 380 | 21 | 694 |
Income taxes | 155 | 18 | 283 | 142 |
Preferred shares valuation | — | — | — | 147 |
Adjusted EBITDA from investment in joint ventures | 3,997 | 6,562 | 6,009 | 8,559 |
Consolidated EBITDA
Consolidated EBITDA, as defined in the Company's Credit Facility agreement, is used in determining the Company's compliance with its covenants. The Consolidated EBITDA is substantially similar to Adjusted EBITDA, except that Adjusted EBITDA from the TDI joint venture is only included into Consolidated EBITDA for the purpose of the Company's Credit Facility when Adjusted EBITDA earned in the TDI joint venture is distributed up to the Company. Consolidated EBITDA is calculated on a rolling twelve-month basis.
Working Capital
Working capital is defined as current assets less current liabilities as reported on the consolidated statements of financial position.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document constitute forward-looking statements or information (collectively referred to herein as "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements generally can be identified by the words "believe", "anticipate", "expect", "plan", "estimate", "target", "continue", "could", "intend", "may", "potential", "predict", "should", "will", "objective", "project", "forecast", "goal", "guidance", "outlook", "effort", "seeks", "schedule" or other expressions of a similar nature suggesting future outcome or statements regarding an outlook.
Disclosure related to expected future commodity pricing or trends, revenue rates, equipment utilization or operating activity levels, operating costs, capital expenditures and other prospective guidance provided throughout this MD&A, including, but not limited to, information provided in the "Funds Flow from
The forward-looking statements are based on current expectations, estimates and projections about the Company and the industries in which the Company operates, which speak only as of the date such statements were made or as of the date of the report or document in which they are contained. They are subject to known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risk factors include, among others: general economic and business conditions which will, among other things, impact demand for and market prices of the Company's services and the ability of the Company's customers to pay accounts receivable balances; volatility of and assumptions regarding crude oil and natural gas commodity prices; fluctuations in currency and interest rates; economic conditions in the countries and regions in which the Company conducts business; political uncertainty and civil unrest; the Company's ability to implement its business strategy; impact of competition; the Company's defence of lawsuits; availability and cost of labour and other equipment, supplies and services; the Company's ability to complete its capital programs; operating hazards and other difficulties inherent in the operation of the Company's oilfield services equipment; availability and cost of financing and insurance; timing and success of integrating the business and operations of acquired companies; actions by governmental authorities; government regulations and the expenditures required to comply with them (including safety and environmental laws and regulations and the impact of climate change initiatives on capital and operating costs); the adequacy of the Company's provision for taxes; the Company's response to the global COVID-19 pandemic; and other circumstances affecting the Company's business, revenues and expenses.
The Company's operations and levels of demand for its services have been, and at times in the future may be, affected by political risks and developments, such as expropriation, nationalization, or regime change, and by national, regional and local laws and regulations such as changes in taxes, royalties and other amounts payable to governments or governmental agencies and environmental protection regulations. Should one or more of these risks or uncertainties materialize, or should any of the Company's assumptions prove incorrect, actual results may vary in material respects from those expressed or implied by the forward-looking statements. The impact of any one factor on a particular forward-looking statement is not determinable with certainty as such factors are interdependent upon other factors, and the Company's course of action would depend upon its assessment of the future considering all information then available.
For additional information refer to the "Risk and Uncertainties" section of this MD&A. Readers are cautioned that the lists of important factors contained herein are not exhaustive. Unpredictable or unknown factors not discussed in this MD&A could also have material adverse effects on forward-looking statements.
Although the Company believes the expectations conveyed by the forward-looking statements are reasonable based on information available to it on the date such forward-looking statements are made, no assurances can be given as to future results, levels of activity and achievements. Except as required by law, the Company assumes no obligation to update forward-looking statements should circumstances or its projections, anticipations, estimates or opinions change.
SOURCE
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