News Column

Xtreme Reports Record Quarterly and Full Year 2012 Financial Results and Appointment of CEO

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CALGARY, ALBERTA -- (Marketwire) -- 03/06/13 -- Xtreme Drilling and Coil Services (TSX: XDC) announce fourth quarter 2012 and full year operating results. It is anticipated that filing will take place on SEDAR of audited Consolidated Financial Statements and Notes to the audited Consolidated Financial Statements and Management's Discussion and Analysis for the twelve months ended December 31, 2012 on Friday, March 8, 2013.

Xtreme has scheduled a conference call to discuss results with investors, analysts, and stakeholders on Thursday, March 7, 2013, beginning promptly at 9:00 am MT (10:00 am CT, 11:00 am ET).

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.

+1 866-225-2055 (North America Toll-Free) or +1 416-340-8410 (Alternate)

An audio replay of the call will be available until Thursday, March 14, 2013. To access the replay, call +1 800-408-3053 or +1 905-694-9451 and enter pass code 9289172.


-- In light of the dramatic turnaround in financial and operating performance, the Board of Directors has removed the interim designation and appointed Tom Wood as Chief Executive Officer and suspended the CEO search. As a founding shareholder Mr. Wood has been involved in the reorganization of the Drilling Segment which has led to significantly improved profitability. In addition, Mr. Wood led the restructuring effort to turn the Coil Services segment to profitability over the past six months. While the financial performance has recovered significantly from the second quarter 2012 low, the Company is focused on maintaining this momentum to attain a profitability level in the top quartile among peers, by year end. The executive team is fully dedicated to achieving this target while focusing on strengthening the balance sheet and liquidity generation to drive organic growth.-- Record adjusted EBITDA of $14.8 million in the fourth quarter of 2012, an increase of 44% over the previous quarter and 140% over the fourth quarter of 2011. The record quarter was driven by strong performance in both the Drilling and Coil Services segments. The US operations for both the Drilling and Coil Services segments recognized a significant increase in operating margin due to recent cost controls and process improvements. For the year ended December 31, 2012, adjusted EBITDA increased to $39.7 million as compared to $21.9 million for the prior year.-- Record revenue of $50.4 million in the fourth quarter of 2012, an increase of 6% over the previous quarter and 61% over the fourth quarter of 2011. For the year ended December 31, 2012 the Company recognized revenue of $174.2 million, an increase of 67% or $70.2 million from 2011. In addition, operating days for 2012 increased to 6,550 as compared to 4,602 in 2011. The increase in revenue for the year was a function of 42% more operating days in 2012 and an increase in average revenue per day to $26,588 from $22,594 in 2011.-- The Coil Services segment (includes U.S. and Saudi Arabia XSR) increased operating profit to $2.6 million in the fourth quarter of 2012 as compared to a loss in the previous quarter of $260 thousand. This was driven by the US division which generated an operating profit on strong cost controls and operational reorganization as well as the Saudi Arabia division which increased profitability on stronger utilization for the quarter.-- Completed aggressive capital expansion program in which the Company built eight XDR 500 drilling rigs, converted three XDR 400 rigs to XDR 500 rigs and built five new XSR large diameter coiled tubing units. With the subsequent sale of one of the new-build XSR rigs in the first quarter of 2013, the Company currently has 21 XDR rigs and 7 XSR units available to work.-- Renewed the $150 million credit facility with the existing syndicate of banks at year end. Finished 2012 with $142 million in net debt (total debt less cash) and a funded debt to EBITDA ratio of 3.63. This marks significant improvement from the peak funded debt to EBITDA ratio of 5.73 at June 30, 2012. With the continued focus on improving the balance sheet, the Company is committed to aggressively bring down leverage ratios over the coming quarters. Free cash flow generation should be significant during 2013 with planned maintenance capital expenditures currently at $15 million. This is down significantly from total capital expenditures of $115 million in 2011 and $112 million in 2012. Subsequent to quarter end, the Company paid down $5 million on the $10 million HSBC demand note issued in 2012. The Company anticipates paying down the remaining $5 million by the April 30, 2013 due date.-- Xtreme recognized an impairment loss on the prototype XSR unit 111 during the fourth quarter of $3.1 million. This relates to the sale of the unit to a group overseas. The sale closed in February 2013. It was required that the Company move the asset to available for sale, as it was contracted at year end. Additionally, the Company recognized approximately $2 million in additional depreciation expense in the fourth quarter related to a change in accounting estimate for depreciation of spares.

Selected Quarterly Financial Information

Three months ended Dec 31, 2012 Sep 30, 2012 Jun 30, 2012 Mar 31, 2012----------------------------------------------------------------------------Revenue 50,376 47,658 38,851 37,265Adjusted EBITDA 14,803 10,259 7,168 7,535Adjusted EBITDA as a percentage of Revenue 29 22 18 20Adjusted EBITDA per share (1) - basic ($) 0.18 0.16 0.11 0.11Net income (loss) 4,430 (3,744) (2,603) 930Net income (loss) per share - basic ($) 0.05 (0.06) (0.04) 0.01Capital assets 408,573 418,628 418,371 372,834Total assets 494,142 501,945 502,868 455,505Cash 5,177 18,397 6,979 3,481Debt, including operating line 146,922 138,156 151,018 117,490----------------------------------------------------------------------------Operating days 1,891 1,742 1,494 1,423Utilization % - Drilling Services 85 86 74 84Utilization % - Coil Services 47 36 57 56Utilization % - Total 77 74 70 79Weighted average rigs in service 26.8 26.0 23.4 19.8Total rigs, end of quarter 27 26 25 22----------------------------------------------------------------------------

Excerpt from Management's Discussion and Analysis for the twelve months ended December 31, 2012


Xtreme Drilling and Coil Services Corp. was founded with the mission of redefining what is possible in oil and gas exploration and production, through a fierce dedication to driving innovation. Since 2005, Xtreme has introduced numerous breakthrough technologies for both drilling and coiled tubing services. These advancements have enabled Xtreme to consistently set new performance benchmarks within the industry.

In 2012, Xtreme put that technology to work on a far greater scale than ever before. With the completion of an aggressive capital expansion program, the company dramatically grew the fleet of XDR drilling rigs and XSR coiled tubing units-nearly doubling its size in a span of 18 months.

At December 31, 2012 Xtreme had 19 of 21 XDR drilling rigs and 4 of 7 XSR coiled tubing units working. As previously announced, the 20th XDR drilling rig went to work during the first week of 2013. The final new-build XDR rig went to work in October of 2012 and thus marked the end of the ambitious capital expansion program. The total capital spend was over $200 million and included eight XDR 500 rigs, three conversions of XDR 400 rigs to XDR 500 rigs and five new large diameter coiled tubing units.

Xtreme now operates one of the youngest high specification fleets in the land drilling industry, with an average age of less than three years old. The company believes the fleet is ideally suited to excel in today's major North American oil and natural gas liquids resource plays. Accordingly, all of these tier 1 new-build rigs were contracted to operators in the Bakken/Three Forks play in North Dakota and the DJ Basin/Niobrara play in Colorado. The company expects this focus on oil and liquids-rich gas production will increase utilization, day rates, and returns relative to competitors in the years to come.

Xtreme began 2012 with three XSR coiled tubing units-two operating in Saudi Arabia, where they perform deep horizontal re-entry drilling. In 2012 the company grew the XSR coiled tubing service offering with the addition of five new-build units. With the deepest reach in the marketplace and a proprietary AC electric technology, the newest XSR units enable operators in North American resource plays to go deeper with their wells and as such realize higher initial production rates and ultimate recoveries. Two of the XSR units are currently working in the Eagle Ford shale of South Texas. These units are primarily performing post-frac plug mill outs and pre-frac well preps. However, this technology also has exciting potential as the market for new fracing technology grows.

Today, Xtreme is at an important inflection point. As production continues to soar in US resource plays, the substantial investment in fleet expansion and R&D gives Xtreme a strong platform to capitalize upon as the company embarks on the current initiative: optimizing operations to realize the full potential of the expanded fleet. With the bold expansion of the past 18 months complete for now, the company is transitioning to focused execution.

The initial improvement in operating performance was evidenced throughout the second half of 2012. Adjusted EBITDA margins hit a low point in the second quarter of 2012 at 18.5% and increased to 29.2% by the fourth quarter of the year. The company anticipates that continued efforts to improve operations can result in margins that are consistently near the upper end of the industry range. Additionally, the company is working to move additional rigs into the Middle East market where there is a strong performance track record. It is anticipated that the two idle XSR units in the Eagle Ford will begin operations in Q2 and Q3 2013 respectively.

Finally, the company is committed to increasing free cash flow and reducing leverage, which was utilized primarily to finance the aggressive growth of the past 18 months. With planned maintenance capex of $15 million in 2013 the company anticipates being able to significantly decrease debt over the course of the year.

Xtreme Drilling and Coil Services Corp.Formerly known as Xtreme Coil Drilling Corp.Consolidated Statements of Financial Position(in thousands of Canadian dollars) Dec 31, 2012 Dec 31, 2011 Jan 1, 2011 --------------------------------------------- ---------------------------------------------AssetsCurrent assets Cash and cash equivalents 5,177 5,892 2,994 Accounts receivable 43,669 45,353 37,083 Other receivables 35 1,906 2,200 Assets held for sale 9,308 - - Prepaid expenses and other 2,021 2,090 2,551 Income tax recoverable 391 934 1,967 Inventory 5,746 5,863 5,402 --------------------------------------------- 66,347 62,038 52,197Non-current assetsDeferred tax asset 15,002 7,566 4,265Property and equipment 408,573 341,198 233,193Intangible assets 4,220 4,523 4,793 ---------------------------------------------Total Assets 494,142 415,325 294,448 --------------------------------------------- ---------------------------------------------Liabilities and Shareholders' EquityCurrent liabilities Bank indebtedness 7,834 - 8,317 Accounts payable and accrued liabilities 26,642 26,175 10,097 Current portion of long-term debt 13,361 500 12,224 --------------------------------------------- 47,837 26,675 30,638Long-term liabilitiesLong-term debt 125,727 80,937 18,952 ---------------------------------------------Total Liabilities 173,564 107,612 49,590 ---------------------------------------------Shareholders' equityShare capital 327,197 310,296 253,765Share option reserve 11,572 10,338 8,585Accumulated deficit (5,312) (4,325) (4,496)Foreign currency translation reserve (12,879) (8,596) (12,996) ---------------------------------------------Total Shareholders' Equity 320,578 307,713 244,858 ---------------------------------------------Total Liabilities and Shareholders' Equity 494,142 415,325 294,448 --------------------------------------------- ---------------------------------------------Xtreme Drilling and Coil Services Corp.Formerly known as Xtreme Coil Drilling Corp.Consolidated Statements of (Loss) IncomeFor the years ended December 31, 2012 and 2011(in thousands of Canadian dollars, except share and per share data) 2012 2011 ------------------------------ ------------------------------Revenue 174,150 103,982 ------------------------------Expenses Operating expenses 125,528 74,742 General and administrative expenses 9,147 9,622 Depreciation of property and equipment 26,975 11,991 Amortization of intangibles 303 304 Stock-based compensation 1,229 1,826 Foreign exchange (gain) loss (1,792) 1,790 Loss on sale of equipment 257 159 Impairment of accounts receivable 6,235 - Impairment of assets held for sale 3,133 - Loss on damage of property and equipment 538 - Other income (expense) 175 (43) Interest expense 7,919 2,532 ------------------------------(Loss) Income before tax for the year (5,497) 1,059Tax expense (recovery) Current 2,666 2,571 Deferred (7,176) (1,683) ------------------------------Total tax (recovery) expense (4,510) 888Net (loss) income for the year (987) 171 ------------------------------Net (loss) income per common share - basic (0.01) 0.00 - diluted (0.01) 0.00Weighted average number ofcommon shares - basic 69,618,457 60,481,719 - diluted 69,759,835 61,298,859Xtreme Drilling and Coil Services Corp.Formerly known as Xtreme Coil Drilling Corp.Consolidated Statements of Comprehensive (Loss) IncomeFor the years ended December 31, 2012 and 2011(in thousands of Canadian dollars) 2012 2011 -------------------------- --------------------------Net (loss) income for the year (987) 171Other comprehensive (loss) income Unrealized (loss) gain on translating financial statements of foreign operations (4,283) 4,400 --------------------------Comprehensive (loss) income for the year (5,270) 4,571 -------------------------- --------------------------Xtreme Drilling and Coil Services CorpFormerly known as Xtreme Coil Drilling Corp.Consolidated Statements of Changes in Shareholders' EquityFor the years ended December 31, 2012 and 2011(in thousands of Canadian dollars) Foreign Share currency Total Share option Accumulated translation shareholders' capital reserve deficit reserve equity ------------------------------------------------------- -------------------------------------------------------Balance at January 1, 2011 253,765 8,585 (4,496) (12,996) 244,858 -------------------------------------------------------Net income for the year - - 171 - 171Other comprehensive incomeCurrency translation differences - - - 4,400 4,400 -------------------------------------------------------Total comprehensive income - - 171 4,400 4,571 -------------------------------------------------------Employee share option scheme:Value of employees services 133 1,867 - - 2,000Proceeds from shares issued 56,398 (114) - - 56,284 -------------------------------------------------------Total transactions with owners 56,531 1,753 - - 58,284 -------------------------------------------------------Balance at December 31, 2011 310,296 10,338 (4,325) (8,596) 307,713 ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- -------------------------------------------------------Balance at January 1, 2012 310,296 10,338 (4,325) (8,596) 307,713 -------------------------------------------------------Net loss for the year - - (987) - (987)Other comprehensive lossCurrency translation differences - - - (4,283) (4,283) -------------------------------------------------------Total comprehensive loss - - (987) (4,283) (5,270) -------------------------------------------------------Employee share option scheme:Value of employee services 105 1,339 - - 1,444Proceeds from shares Issued, net of share issue costs 16,796 (105) - - 16,691 -------------------------------------------------------Total transactions with owners 16,901 1,234 - - 18,135 -------------------------------------------------------Balance at December 31, 2012 327,197 11,572 (5,312) (12,879) 320,578 ------------------------------------------------------- -------------------------------------------------------Xtreme Drilling and Coil Services Corp.Formerly known as Xtreme Coil Drilling Corp.Consolidated Statements of Cash FlowsFor the years ended December 31, 2012 and 2011(in thousands of Canadian dollars) 2012 2011 -------------------------- --------------------------Cash flow provided by (used in):Operating activitiesNet (loss) income for the year (987) 171Items not affecting cash: Depreciation and amortization 27,278 12,295 Stock-based compensation 1,229 1,826 Loss on sale of equipment 257 159 Interest expense 6,963 2,326 Amortization of debt issuance costs 966 206 Unrealized foreign exchange (gain) loss (1,792) 1,790 Deferred tax (recovery) expense (7,176) 1,683 Impairment on accounts receivable 6,235 - Loss on damage 538 - Impairment on assets held for sale 3,133 - Interest paid (6,491) (1,534) Changes in items of working capital (1,692) 8,343 --------------------------Net cash generated from operating activities 28,461 27,265 --------------------------Financing activitiesProceeds from shares issued, net of issue costs 16,192 55,304Proceeds from exercise of stock options 255 783Proceeds from long-term debt 66,260 145,490Repayment of long-term debt (5,466) (95,963)Proceeds from (repayment of) operating facility 7,834 (8,317)Debt issuance cost (1,459) (1,070) -------------------------- Net cash generated from financing activities 83,616 96,227 --------------------------Investing activitiesProceeds from sale of equipment 681 478Capital expenditures (112,260) (115,340)Increase in intangibles - (34) -------------------------- Net cash used in investing activities (111,579) (114,896) --------------------------Effect of exchange rate changes on cash and cash equivalents (1,213) (5,698) --------------------------(Decrease) Increase in cash and cash equivalents (715) 2,898Cash and cash equivalents - beginning of year 5,892 2,994 --------------------------Cash and cash equivalents - end of year 5,177 5,892 -------------------------- --------------------------Adjusted EBITDAFor the three and twelve months ended December 31, 2011 and 2010(in thousands of Canadian dollars) Three months ended Twelve months ended Dec 31, 2012 Dec 31, 2011 Dec 31, 2012 Dec 31, 2011----------------------------------------------------------------------------Net income (loss) 4,430 (1,092) (987) 171Tax (recovery) expense (6,699) 1,400 (4,510) 888Interest expense 2,305 963 7,919 2,532Loss on sale of equipment 114 212 257 159Other expense (income) 175 (1) 175 (43)Loss on damage - - 538 -Impairment of accounts receivable - - 6,235 -Impairment on sale of rig 3,133 - 3,133 -Foreign exchange loss (gain) 935 (1,153) (1,792) 1,790Stock-based compensation 70 278 1,229 1,826Amortization of intangibles 75 76 303 304Depreciation of property and equipment 9,975 3,655 26,975 11,991---------------------------------------------------------------------------- 14,513 4,338 39,475 19,618----------------------------------------------------------------------------Non-recurring items: Inventory adjustments 291 1,091 291 1,442 Other - 716 - 829----------------------------------------------------------------------------Adjusted EBITDA 14,804 6,145 39,766 21,889----------------------------------------------------------------------------Adjusted EBITDA per share ($) 0.18 0.09 0.57 0.36----------------------------------------------------------------------------

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 March 6, 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.

In preparing this news release, management considered the following risk factors: fluctuations in crude oil and natural gas prices, supply and demand; fluctuation in foreign currency exchange and interest rates; financial stability of Xtreme's customers; current and future applications for Xtreme's proprietary technology; competition from other drilling contractors; regulatory and economic conditions in regions where Xtreme operates; environmental constraints; changes to government legislation; international trade barriers or restrictions; and, where appropriate, global political and military events.

Financial outlook information contained in this news release about prospective results of operations, financial position or cash provided by operating activities is based on assumptions about future events, including economic conditions and proposed courses of action, and on management's assessment of relevant information currently available. Readers are cautioned such financial outlook information contained in this news release is not appropriate for purposes other than for which it is disclosed here. Readers should not place undue importance on FLS and should not rely on this information as of any other date. Except as required pursuant to applicable securities laws, Xtreme 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

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 (XDR) and Coil Services (XSR) 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

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

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