ENP Newswire -
Release date- 01082014 -
SECOND QUARTER 2014 SUMMARY (compared with a year earlier)
Services revenue of
Adjusted EBITDA of
Income attributable to shareholders of the Corporation
EPS (diluted) of
Weighted average diluted shares outstanding 93.9 million, up 20% from 78.3 million
Declared second quarter dividend of
Canadian utilization of 36% was up 177% year-over-year, and exceeded the industry average by 1.38 times.
US utilization of 75% was down 5% year-over-year, as a result of three drilling rig re-certifications and adverse weather conditions in
SIX MONTHS ENDED 2014 SUMMARY (compared with a year earlier)
Services revenue of
Income attributable to shareholders of the Corporation
EPS (diluted) of
Weighted average diluted shares outstanding 93.8 million, up 21% from 77.7 million
Canadian utilization of 57% was up 33% year-over-year, and exceeded the industry average by 1.33 times.
US utilization of 79% was down 4% year-over-year, as a result of reduced activity in the second quarter.
Second quarter Canadian utilization (spud to rig release days) of 36% was 1.38 times above the industry average utilization level of 25% and 2.32 times above our Q2 2013 utilization level of 13%. We credit our modern drilling fleet and our continued focus on working with our partners to find operating efficiencies as significant contributors to our outperformance in this operating region.
In the US, utilization of 75% was down 5% year-over-year, primarily as a result of three drilling rig re-certifications and adverse weather conditions in
For the first six months ended
US utilization of 79% was down 4% year-over-year, due to the aforementioned three drilling rig re-certifications and adverse weather conditions in
The Corporation was able to generate strong three and six months utilization rates relative to the comparative periods and increased revenue and Adjusted EBITDA despite a decrease in Adjusted EBITDA margin percentage.
The year over-year reduction in Adjusted EBITDA margin percentage was primarily the result of a) lower average base revenue rates in
Earnings per share increased by 10% primarily due to strong second quarter activity levels, partially offset by an increase in the number of shares outstanding as a result of the equity financings in 2013. 'We have reasons to be optimistic across all of our operating geographies, and believe our track record of working with our customers to find efficiencies resulting in reduced well costs will result in continued opportunities for growth' stated
During the first six months of 2014, CanElson generated higher consolidated activity levels than the comparative period, due to relatively strong seasonal activity in
Specifically, rising horizontal well costs and the inherent instability of commodity prices has created an opportunity in the contract drilling market to gain market share through demonstrated efficiency in the drilling process and cost saving programs.
This reduction in drilling costs does not necessarily correspond to a lower revenue rate for the drilling contractor. It instead focuses on the contractor's ability to minimize non-productive time, to maximize performance while drilling, and to flexibly integrate related equipment, services and contract types into the drilling solution.
CanElson's growth opportunities historically have been sourced through existing customers and referrals, rather than through a competitive bid process, which we credit to our performance combined with our ability to identify cost saving opportunities.
We currently have clear customer interest for new build drilling rigs across several operating geographies, and have the financial flexibility to pursue meaningful growth. Going forward, we will continue to pursue a disciplined growth strategy, which contemplates obtaining contracts which meet our investment criteria, and which does not exceed our ability to maintain the quality and performance that our customers have grown to expect.
Our primary challenge continues to be sourcing skilled personnel to crew our growing drilling rig fleet. To this end, our goal is to be an employer of choice, which includes a continued focus on safety, an employee stock participation program, and a platform for growth that fosters career advancement opportunities. As a result, we continue to invest in personnel and customer relationships that allow us to assist in the drilling optimization process.
During the second quarter of 2014, base drilling rig rate pricing levels remained flat in contrast to typical historical rate declines for the drilling industry during the second quarter. The relative strength in 2014 second quarter pricing combined with continued strong demand for drilling rigs capable of efficiently drilling horizontal wells could result in a positive Canadian pricing environment through the upcoming winter drilling season.
CanElson has 25% of its rig fleet focused on oil directed drilling in the
The shift to horizontal drilling in the
In the second quarter, CanElson re-deployed one additional drilling rig from
The rate of wells drilled in the
Going forward we believe that our historical performance and alignment with an experienced and strong local partner (Grupo Diavaz, with 40 years of experience serving PEMEX) positions DCM to expand its range of services if
Based on existing customer contracts and those being finalized, CanElson's 2014 investment and deployment of new rig builds is expected to be as follows:
Rig #44 (tele-double): Delivered in
Rig #45 (tele-double): Delivered in
Rig #46 (tele-double): Expected to commence operations in August under a long-term contract.
Rig #103 (AC triple): Expected to be delivered in Q4 2014 with contract pending.
Rig #49 (AC tele-double): Expected to be delivered in Q4 2014 with contract pending.
Rig #104 (AC triple): Expected to be delivered in Q1 2015 with contract pending.
For 2014 we expect to continue investing in our fleet of truck-hauled CNG delivery trailers and compressors. For more information about our investment plan see the Capital Availability and Capital Program below.
Capital Availability and Capital Program
CanElson has approximately
2014 Capital Program
2014 expansion capital is for the completion of additional new drilling rig builds. Year to date, CanElson has spent
Primary Corporate Objectives
CanElson's primary objective is to maintain and strengthen its above industry average utilization by consistently providing operational excellence and drilling efficiencies to its customers. With this focus, our aim is to be well positioned to secure customer commitments and capitalize on new opportunities. Subject to securing suitable customer commitments, we intend to carry out the following activities to further enhance our competitive positioning:
Continue to expand our standard tele-double fleet.
Expand further into the AC triple drilling rig market.
Expand our service offering in
Continue to form innovative long-term business relationships.
Continue growth through strategic acquisitions.
Provide customers with lower overall well costs.
This press release contains references to Adjusted EBITDA, funds flow, gross margin, and effective tax rate to shareholders of the Corporation. These financial measures are not measures that have any standardized meaning prescribed by IFRSs and are therefore referred to as non-GAAPmeasures. The non-GAAPmeasures used by CanElson may not be comparable to similar measures used by other companies.
Adjusted EBITDAis defined as income (loss) before interest, taxes, business acquisition transaction costs, depreciation and amortization, stock based compensation expense, gains on disposal of property and equipment, foreign exchange and share of unconsolidated joint venture profits. Adjusted EBITDA includes 100% of revenue and expenses from controlled entities where the Corporation holds less than 100% of the outstanding shares.
Management believes that, in addition to net and total comprehensive income (loss), Adjusted EBITDA is a useful supplemental measure as it provides an indication of the results generated by CanElson's principal business activities prior to consideration of how these activities are financed, how the results are taxed in various jurisdictions, or how the results are effected by the accounting standards associated with CanElson's stock based compensation plan.
Funds flow from operations is defined as cash provided by operating activities before changes in non-cash working capital. Funds flow from operations is a measure that provides shareholders and potential investors with additional information regarding CanElson's liquidity and its ability to generate funds to finance its operations, fund investing activities and support dividend payments. Management utilizes this measurement to assess CanElson's ability to finance operating activities and capital expenditures.
STANDARD INDUSTRY DEFINITIONS
In addition to the non-GAAP measures listed above, we use a number of industry and other terms in this press release which are described below: Drilling rigs are categorized as singles, doubles, or triples based on the number of connected segments or 'joints' of drill pipe that can be handled as a 'stand' in the mast. Taller masts (e.g. triples) generally correspond to greater drilling depth capacities.
We often refer to many of our rigs as tele-doubles - 'tele' is short for telescoping, which refers to a design featuring an upper section of the mast that nests inside the lower section for transport and telescopes to full operating height to handle two-joint stands while drilling. Drilling rigs are also categorized as mechanical or AC electric, which refers to the method by which the hoisting and pumping equipment are powered.
CanElson presents its activity levels on a drilling day basis, and sources its utilization statistics from the
Revenue per operating day is calculated as total segment revenue divided by the number of drilling days (spud to rig release) and is not indicative of our drilling rig rates.
FORWARD LOOKING INFORMATION
This press release contains forward-looking information pertaining to: our belief that our strategy and key drivers have uniquely positioned us to sustain relatively strong profitability during the full drilling industry cycle; our expectation of a positive Canadian pricing environment through the upcoming winter drilling season; our expectation that we will achieve utilization in 2014 similar to utilization levels of 2013 for our
This forward-looking information involves material assumptions and known and unknown risks and uncertainties, including the risks set out under 'Risks and Uncertainties', certain of which are beyond CanElson's control. CanElson's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website www.sedar.com) describe the other risks, the material assumptions and other factors that could influence actual results and which are incorporated herein by reference.
Actual results, performance or achievements could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking information will transpire or occur, or if any of them do so, what benefits CanElson will derive therefrom.
The forward-looking information is made as at the date of this press release and CanElson does not undertake any obligation to update publicly or to revise any of the included forward-looking information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.
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