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AKITA Drilling Ltd. Announces Year-to-Date Earnings and Cash Flow

AKITA Drilling Ltd. Announces Year-to-Date Earnings and Cash Flow

Canada NewsWire

CALGARY, Nov. 3, 2015 /CNW/ - While business conditions have been challenging, AKITA has generated positive funds flow in each quarter this year.  Funds flow from operations for the quarter ended September 30, 2015 was $8,225,000 compared to $10,942,000 in the corresponding quarter in 2014 while funds flow from operations for the January to September period in 2015 was $31,356,000 compared to $39,216,000 for the corresponding nine month period in 2014.

AKITA Drilling Ltd.'s net loss for the three months ended September 30, 2015 was $7,581,000 (net loss of $0.42 per share) on revenue of $22,021,000, compared to net income of $3,854,000 (net income of $0.21 per share) on revenue of $36,556,000 for the corresponding period in 2014.  The third quarter results for 2015 include an asset impairment expense of $8,200,000 (after tax effect of $6,005,000 or $0.33 per share) with respect to certain of its conventional rigs in addition to a net loss of $1,576,000 (net loss of $0.09 per share) as a result of routine operations. 

During the nine months ended September 30, 2015, the Company reported a net loss of $4,983,000 (net loss of $0.28 per share) compared to net income of $16,085,000 (net income of $0.90 per share – basic; $0.89 per share - diluted) in the comparative year-to-date period in 2014.  In addition to the asset impairment expense of $8,200,000 recorded in the third quarter of 2015, the Company recorded a deferred tax charge of $1,191,000 in the second quarter of 2015 as a result of a corporate income tax increase in Alberta. 

Rig activity decreased during the third quarter of 2015 to 839 operating days or 25.3% utilization compared to an industry average of 23.8% and to 1,519 operating days or 45.0% utilization during the third quarter of 2014.  For the nine months ended September 30, 2015, rig activity decreased to 3,539 operating days or 34.8% utilization compared to an industry average of 24.0% utilization and to 4,851 operating days year to date in 2014.  These decreases were attributable to weaker market conditions, particularly for conventional rigs, although all rig classes were adversely affected to some extent.

During the quarter, the Company received API Q2 certification from the American Petroleum Institute, the first drilling contractor to receive this global certification.  API Q2 is an encompassing quality control and assurance standard that ensures the Company conforms to rigorous standards throughout its operations including such key functions as procurement, asset monitoring and safety.  Management anticipates that customers who place value on a repeatable execution model will find this achievement important in the awarding of contracts.

Oilfield market weakness is continuing and appears likely to persist for the balance of the current year and 2016.  AKITA is well positioned to withstand this downturn as the Company employs a risk management style that contemplates and addresses industry cycles prior to them becoming a reality.  The balance sheet is exceptionally strong with positive cash and working capital, attractive rig assets, no short or long-term borrowings and an unused $100 Million credit facility.  Management has undertaken a number of actions to reduce the Company's capital and operating costs to reflect the current conditions, while remaining poised for future opportunities.

Selected information from AKITA Drilling Ltd.'s Management's Discussion and Analysis from the Quarterly Report is as follows:

Basis of Analysis in this MD&A, Non-Standard and Additional GAAP Items
The Company reports its joint venture activities in the financial statements in accordance with International Financial Reporting Standards ("IFRS"), IFRS 11 "Joint Arrangements". In determining the classification of its joint arrangements, AKITA considers whether the joint arrangements are structured through separate vehicles, if the legal form of the separate vehicles confers upon the parties direct rights to assets and obligations for liabilities relating to the arrangements, whether the contractual terms between the parties confer upon them rights to assets and obligations for liabilities relating to the arrangements as well as if other facts and circumstances lead to rights to assets and obligations for liabilities being conferred upon the parties to the arrangement prior to concluding that AKITA's joint ventures are classified as joint ventures rather than joint operations. Under IFRS 11, AKITA is required to report its joint venture assets, liabilities and financial activities using the equity method of accounting. However, for purposes of analysis in this MD&A, the proportionate share of assets, liabilities and financial activities is included as non-standard GAAP information ("Adjusted") where appropriate. The Company provides the same drilling services and utilizes the same management, financial and reporting controls for its joint venture activities as are in place for its wholly owned operations. None of AKITA's joint ventures are individually material in size when considered in the context of AKITA's overall operations.

Operating margin, revenue per operating day, operating and maintenance expense per operating day and operating margin per operating day are not recognized measures under IFRS. Management and certain investors may find operating margin data to be a useful measurement metric as it provides an indication of the profitability of the business prior to the influence of depreciation, overhead expenses, financing costs and income taxes. Management and certain investors may find "per operating day" measures for revenue and operating margin indicate pricing strength while operating and maintenance expense per operating day demonstrates the degree of cost control and provides a proxy for specific inflation rates incurred by the Company. Readers should be cautioned that in addition to the foregoing, other factors, including the mix of rigs between conventional and pad and singles, doubles and triples can also impact these results. Readers should also be aware that AKITA includes standby revenue, construction revenue and construction costs in its determination of "per operating day" results.

Funds flow from operations is considered as an additional GAAP measure under IFRS. AKITA's method of determining funds flow from operations may differ from methods used by other companies and includes cash flow from operating activities before working capital changes. Management and certain investors may find funds flow from operations to be a useful measurement to evaluate the Company's operating results at year-end and within each year, since the seasonal nature of the business affects the comparability of non-cash working capital changes both between and within periods.

Revenue and Operating & Maintenance Expenses


Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Revenue per Interim Financial Statements (1)

22.0

36.6

(14.6)

(40%)

91.3

119.3

(28.0)

(23%)

Proportionate Share of Revenue from Joint Ventures (2)

6.3

13.8

(7.5)

(54%)

26.8

47.9

(21.1)

(44%)

Adjusted Revenue (2)

28.3

50.4

(22.1)

(44%)

118.1

167.2

(49.1)

(29%)





Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Operating & Maintenance Expenses per Interim Financial Statements (1)

14.2

25.1

(10.9)

(43%)

59.3

78.7

(19.4)

(25%)

Proportionate Share of Operating & Maintenance Expenses from Joint Ventures (2)

4.0

9.4

(5.4)

(57%)

17.1

30.7

(13.6)

(44%)

Adjusted Operating & Maintenance Expenses (2)

18.2

34.5

(16.3)

(47%)

76.4

109.4

(33.0)

(30%)











Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Adjusted Revenue (2)

28.3

50.4

(22.1)

(44%)

118.1

167.2

(49.1)

(29%)

Adjusted Operating & Maintenance Expenses (2)

18.2

34.5

(16.3)

(47%)

76.4

109.4

(33.0)

(30%)

Adjusted Operating Margin(1)(2)(3)

10.1

15.9

(5.8)

(36%)

41.7

57.8

(16.1)

(28%)











Three Months Ended September 30

Nine Months Ended September 30

$Dollars

2015

2014

Change

% Change

2015

2014

Change

% Change

Adjusted Revenue per Operating Day (2)

34,371

33,139

1,232

4%

35,295

34,457

838

2%

Adjusted Operating & Maintenance Expenses per Operating Day (2)

21,973

22,708

(735)

(3%)

22,833

22,542

291

1%

Adjusted Operating Margin per Operating Day (2)(3)

12,398

10,431

1,967

19%

12,462

11,915

547

5%

(1)

Proportionate share of revenue from joint ventures, adjusted revenue, proportionate share of operating & maintenance expenses from joint ventures, adjusted operating & maintenance expenses, adjusted operating margin, adjusted revenue per operating day, adjusted operating & maintenance expenses per operating day and adjusted operating margin per operating day are non-standard accounting measures. See commentary in "Basis of Analysis in this MD&A, Non-Standard and Additional GAAP Items".



(2)

Adjusted operating margin is the difference between adjusted revenue and adjusted operating & maintenance expenses.



(3)

Balances may differ from financial statements as a result of rounding.

Third Quarter Comparatives 
During the third quarter of 2015, adjusted revenue decreased to $28,356,000 from $50,338,000 during the third quarter of 2014 as a result of decreased rig activity. While all rig categories were affected, the declines were most pronounced for AKITA's conventional rigs.

Although adjusted revenue for the three month period ended September 30, 2015 decreased, adjusted revenue per operating day increased to $34,371 during the third quarter of 2015 from $33,139 in the comparative quarter in 2014 due to an increased proportion of the Company's revenue being generated by its pad drilling rigs versus conventional rigs.  Pad rigs, compared to conventional rigs, typically generate higher revenue on a "per day" basis.

Adjusted operating and maintenance costs are tied to revenue and amounted to $18,128,000 ($21,973 per operating day) during the third quarter of 2015 compared to $34,494,000 ($22,708 per operating day) in the same period of the prior year.  The decreases in operating and maintenance costs, both on a total and "per day" basis, resulted primarily from reduced drilling activity and secondarily from cost reductions.

The adjusted operating margin for the Company decreased to $10,228,000 in the third quarter of 2015 from $15,844,000 during the corresponding quarter of 2014 primarily due to decreased drilling activity. Although the overall operating margin decreased during the third quarter of 2015 as compared to the corresponding quarter in 2014, AKITA's adjusted operating margin per operating day increased to $12,398 from $10,431 in the comparative period in 2014 as a result of a change in rig mix that included a higher proportion of pad rigs working.

Year-to-Date Comparatives 
During the first nine months of 2015, adjusted revenue decreased to $118,063,000 from $167,153,000 during the comparative nine month period of 2014 as a result of lower drilling activity. 83% of this decline in activity is attributable to AKITA's conventional rigs.

Although adjusted revenue for the year-to-date period ended September 30, 2015 decreased, adjusted revenue per operating day increased to $35,295 during the first nine months of 2015 from $34,457 in the comparative period in 2014 due to the same factors that affected third quarter adjusted revenue per operating day.

Adjusted operating and maintenance costs are tied to revenue and amounted to $76,377,000 ($22,833 per operating day) during the first nine months of 2015 compared to $109,352,000 ($22,542 per operating day) in the same period of the prior year.

The adjusted operating margin for the Company decreased to $41,686,000 ($12,462 per operating day) in the first nine months of 2015 from $57,801,000 ($11,915 per operating day) during the corresponding period of 2014.  The reduction in overall operating margin was related to weaker market conditions while the higher proportion of pad drilling that occurred in the first nine months of 2015 compared to the first nine months of 2014 resulted in higher "per operating day" margins.

Other Comments
From time to time, the Company requires customers to make pre-payments prior to the provision of drilling services.  In addition, from time to time, the Company records cost recoveries related to capital enhancements for specific customer related projects. At September 30, 2015, deferred revenue related to these activities totalled $32,000 (September 30, 2014 - $364,000).

Depreciation and Amortization Expense


Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Depreciation and Amortization Expense

8.9

7.1

1.8

25%

26.3

22.2

4.1

18%

The depreciation and amortization expense reported in the third quarter of 2015 of $8,922,000 was higher than for the corresponding quarter in 2014 ($7,088,000). AKITA depreciates its rig fleet on a unit of production basis and while overall drilling days declined during the third quarter of 2015 compared to the corresponding quarter in 2014, the most active rigs in the third quarter were also the rigs with the highest cost bases.

Depreciation and amortization expense for the first nine months of 2015 totalled $26,266,000 compared to $22,208,000 for the corresponding period in 2014.  As with the depreciation and amortization expense for the third quarter, the higher cost base for AKITA's active rigs more than offset the lower rig activity levels. In the first nine months of 2015, drilling rig depreciation accounted for 96% of total depreciation and amortization expense (2014 - 96%).

While AKITA conducts many of its drilling operations via joint ventures, the drilling rigs used to conduct those activities are owned jointly by AKITA and its joint venture partners, and not the joint ventures themselves. Therefore, the joint ventures do not hold any property, plant, or equipment assets directly.  Consequently, the depreciation balance reported above includes depreciation on assets involved in both wholly owned and joint ventured activities.

Asset Impairment Loss
International Accounting Standards 36, "Impairment of Assets", requires an entity to consider both internal and external factors when assessing whether there are indications of asset impairment at each reporting period. While the Company did not determine any internal indicators of impairment either at December 31, 2014 or subsequently, it did determine two potential external indicators of impairment at December 31, 2014: a significant decline in the price of crude oil; and the carrying amount of AKITA's net assets exceeding the Company's market capitalization at that date. While both of these indicators remained valid throughout the year, to date, the price of crude oil declined further during the third quarter of 2015, from its trading price earlier in the year, resulting in further deterioration in the overall Canadian drilling market, as demonstrated by unusually weak seasonal improvements in rig utilization following the second quarter of the current year. In addition, management determined that, as a result of this additional weakening of crude oil prices, secondary opportunities to capture value for AKITA's drilling fleet had also become more limited.

The accuracy of asset impairment testing is affected by estimates and judgments in respect of the inputs and parameters that are used to determine recoverable amounts. In performing its impairment tests at September 30, 2015, management determined value in use for each of its cash generating units ("CGUs") using estimated discounted cash flows ("DCFs"), which included estimates of future cash flows, expectations regarding cash flow variability, a determination of the discount rate and consideration of the recoverable amount and salvage value of each CGU.

As a result of performing these impairment tests, the Company recorded an overall impairment of $8,200,000 with respect to certain of AKITA's conventional rigs.  This amount represents the difference between the respective CGU's recoverable amounts and their carrying values.  For assets within CGUs that were determined to be impaired, 81% of the recoverable amounts were calculated based on "value in use" with the remaining 19% calculated based on "fair value less cost of disposal".  The Company did not record any impairment with respect to AKITA's pad rigs.

Selling and Administrative Expense


Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Selling & Administrative Expense per Interim Financial Statements

3.6

4.0

(0.4)

(10%)

12.0

14.1

(2.1)

(15%)

Proportionate Share of Selling & Administrative Expense from Joint Ventures (1)

0.1

0.1

(0.0)

N/A

0.3

0.6

(0.3)

(50%)

Adjusted Selling & Administrative Expense (1)

3.7

4.1

(0.4)

(10%)

12.3

14.7

(2.4)

(16%)

(1)

Proportionate share of selling and administrative expense from joint ventures and adjusted selling and administrative expense are non-standard accounting measures. See commentary in "Basis of Analysis in this MD&A, Non-Standard and Additional GAAP Items".

(2)

Balances may differ from financial statements as a result of rounding.

Adjusted selling and administrative expenses were 10.5% of adjusted revenue in the first nine months of 2015 compared to 8.8% of adjusted revenue in the first nine months of 2014 since adjusted revenue decreased more rapidly than adjusted selling and administrative expenses.  The single largest component was salaries and benefits, which accounted for 59% of these expenses (59% in 2014).  The Company has been able to reduce overall selling and administrative costs, particularly in the second and third quarters, as a result of implementing various management controls.

Equity Income from Joint Ventures


Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Proportionate Share of Revenue from Joint Ventures (1)

6.3

13.8

(7.5)

(54%)

26.8

47.9

(21.1)

(44%)

Proportionate Share of Operating & Maintenance Expenses from Joint Ventures (1)

4.0

9.4

(5.4)

(57%)

17.1

30.7

(13.6)

(44%)

Proportionate Share of Selling & Administrative Expense from Joint Ventures (1)

0.1

0.1

(0.0)

N/A

0.3

0.6

(0.3)

(50%)

Equity Income from Joint Ventures

2.2

4.3

(2.1)

(49%)

9.4

16.6

(7.2)

(43%)










(1)

Proportionate share of revenue from joint ventures, proportionate share of operating & maintenance expenses from joint ventures and proportionate share of selling & administrative expense from joint ventures are non-standard accounting measures. See commentary in "Basis of Analysis in this MD&A, Non-Standard and Additional GAAP Items".

The Company provides the same drilling services and utilizes the same management, financial and reporting controls for its joint venture activities as are in place for its wholly owned operations. The analyses of these activities are incorporated throughout the relevant sections of this MD&A. Joint venture activities are often located in some of the most prospective regions in Canada.  Two thirds of AKITA's joint ventures utilize pad drilling rigs.

Other Income


Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Total Other Income

0.2

0.6

(0.4)

(67%)

0.1

0.6

(0.5)

(83%)

Interest income decreased to $100,000 in the first nine months of 2015 from $142,000 in the corresponding period primarily as a result of reduced interest rates. In addition, between 2011 and 2014, the Company had undertaken significant capital expenditures related to the construction of new rigs and the conversion of conventional rigs into pad rigs, thereby reducing AKITA's cash balances over time.

During the first nine months of 2015, the Company incurred interest expense of $321,000 as a result of the Company's indebtedness in addition to the related future cost of the Company's unfunded defined benefit pension plan. During the corresponding nine month period in 2014, AKITA incurred interest expense of $119,000 primarily for the future cost of the Company's defined benefit pension plan. The Company completed the repayment of its operating loan facility balance during the third quarter of 2015.

During the first nine months of 2015, the Company sold some ancillary assets for $995,000 that resulted in a loss of $61,000.  During the corresponding period in 2014, the Company disposed of an older underutilized pad rig as well as other non-core assets resulting in gains totalling $499,000.

Approximately 69% of amounts recorded as "Net Other Gains" during the first nine months of 2015 related to foreign exchange that was associated with rig construction for AKITA's new pad triple rig which was deployed during the second quarter of 2015.

Income Tax Expense (Recoverable)


Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Current Tax Expense (Recoverable)

(1.4)

0.9

(2.3)

(256%)

(1.0)

5.1

(6.1)

(120%)

Deferred Tax Expense (Recoverable)

(1.4)

0.4

(1.8)

(450%)

1.0

0.3

0.7

233%

Income Tax Expense (Recoverable)

(2.8)

1.3

(4.1)

(315%)

(0.0)

5.4

(5.4)

(100%)

Income tax recoverable decreased to $50,000 in the first nine months of 2015 compared to income tax expense of $5,425,000 in the corresponding period in 2014 mainly due to recording a pre-tax loss as a result of weaker operations and the effect of recording an asset impairment loss. In addition to the effect of the pre-tax loss, during the second quarter of 2015, the Company recorded a one-time deferred tax expense of $1,191,000 related to the corporate income tax increase implemented by the Government of Alberta. Recent capital additions have affected the portion of income taxes that are deferred to future dates.

Net Income (Loss), Funds Flow and Net Cash from Operating Activities


Three Months Ended September 30

Nine Months Ended September 30

$Millions

2015

2014

Change

% Change

2015

2014

Change

% Change

Net Income (Loss)

(7.6)

3.9

(11.5)

(295%)

(5.0)

16.1

(21.1)

(131%)

Funds Flow from Operations (1)

8.2

10.9

(2.7)

(25%)

31.4

39.2

(7.8)

(20%)

(1)

Funds flow from operations is an additional GAAP measure under IFRS. See commentary in "Basis of Analysis in this MD&A, Non-Standard and Additional GAAP Items".

During the three months ended September 30, 2015, the Company reported a net loss of $7,581,000 (net loss of $0.42 per Class A Non-Voting and Class B Common Share (basic and diluted)) compared to net income of $3,854,000 or $0.21 per share (basic and diluted) in the comparative quarter in 2014.  The third quarter of 2015 included an asset impairment expense of $8,200,000 in addition to a net loss of $1,576,000 as a result of routine operations. The net loss reported in the third quarter of 2015 compared to the net income reported in the third quarter of 2014 was also attributable to reductions in drilling activity as well as increased depreciation expense. Funds flow from operations decreased to $8,225,000 during the third quarter of 2015 from $10,942,000 in the corresponding quarter in 2014. Funds flow was negatively affected by weaker drilling activity in the third quarter of 2015 but was not affected by the asset impairment expense, increased depreciation expense or deferred tax expense as these are non-cash items.

During the nine months ended September 30, 2015, the Company reported a net loss of $4,983,000 (net loss of $0.28 per Class A Non-Voting and Class B Common Share (basic and diluted)) compared to net income of $16,085,000 or $0.90 per share (basic) ($0.89 - diluted) in the comparative year-to-date period in 2014. Funds flow from operations decreased to $31,356,000 during the nine months ended September 30, 2015 from $39,216,000 in the corresponding nine months in 2014. The net loss reported on a nine month year-to-date basis compared to the net income reported in 2014 was attributable to reductions in drilling activity coupled with higher depreciation expense, the asset impairment expense in the third quarter of 2015 and the Alberta corporate income tax rate increase during the second quarter. Funds flow from operations was negatively affected by weaker drilling activity and lower day rates but was not affected by depreciation, asset impairment expenses or income tax rate changes as these are all non-cash items. As a result, net loss for the first nine months of 2015 decreased 131% compared to the corresponding period in 2014, while the decline in funds flow when comparing the same periods was 20%.

Fleet and Rig Utilization
At September 30, 2015, AKITA had 36 drilling rigs, including nine that operated under joint ventures, (32.725 net to AKITA), the same number of rigs that were in the Company's fleet one year earlier. During the twelve month period ending September 30, 2015, the Company commissioned three new pad rigs including one in the current year and decommissioned an equal number of conventional rigs.


Three Months Ended September 30

Nine Months Ended September 30


2015

2014

Change

% Change

2015

2014

Change

% Change

Operating Days

839

1,519

(680)

(45%)

3,539

4,851

(1,312)

(27%)

Utilization Rate

25.3%

45.0%

(19.7)

(44%)

34.8%

47.7%

(12.9)

(27%)

Liquidity and Capital Resources
Cash used for capital expenditures totalled $15,335,000 during the first nine months of 2015 (2014 - $71,285,000). Nearly two thirds of current year capital expenditures relate to the completion of a new pad rig that was deployed during the second quarter. Other capital expenditures related to routine items.

At September 30, 2015, AKITA's Statement of Financial Position included working capital (current assets minus current liabilities) of $12,131,000 compared to working capital of $11,061,000 at September 30, 2014 and a working capital deficiency of $5,028,000 at December 31, 2014. Readers should also be aware of the seasonal nature of AKITA's business and its effect on non-cash working capital balances. Typically, non-cash working capital balances reach annual maximum levels at the end of the first quarter or during the second quarter as a result of break-up and decline thereafter as a result of increased drilling activity. During 2015, the drilling activity level did not undergo a significant pick-up following spring break-up as overall market conditions have been unusually weak. Non-cash working capital amounted to $7,328,000 at September 30, 2015 compared to a non-cash working capital deficiency of $7,040,000 at December 31, 2014.

The Company did not have a normal course issuer bid in place during the first nine months of 2015. During the first nine months of 2014, the Company purchased 27,600 Class A Non-Voting Shares at an average price of $15.49 pursuant to a normal course issuer bid.

The Company chooses to maintain a conservative Statement of Financial Position due to the cyclical nature of the industry. In addition to its cash balances, the Company has an operating loan facility with its principal banker totalling $100,000,000 that is available until 2019. The facility has been provided in order to finance general corporate needs, capital expenditures and acquisitions. Management has accessed this facility primarily to enable the Company to fund new rig construction requirements related to drilling contracts that it has been awarded. The interest rate on the facility varies based upon the actual amounts borrowed and ranges from 0.45% to 1.45% over prime interest rates or 1.45% to 2.45% over guaranteed notes, depending on the preference of the Company.  The Company had borrowings of $20,000,000 at December 31, 2014, all of which were repaid during the first nine months of 2015.  The Company did not have any borrowings outstanding at September 30, 2015.

The Company had four rigs under multi-year contracts at September 30, 2015. Of these contracts, two are anticipated to expire in 2016, one in 2018 and one in 2019.

From time to time, the Company may provide guarantees for bank loans to joint venture partners in respect of sales of joint venture interests. At September 30, 2015, AKITA provided $7,183,000 in deposits with the bank for those guarantees. These funds have been classified as "restricted cash" on the Statement of Financial Position.

Forward-Looking Statements
From time to time AKITA makes forward-looking statements. These statements include but are not limited to comments with respect to AKITA's objectives and strategies, financial condition, results of operations, the outlook for the industry and risk management.

By their nature, these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that the predictions and other forward-looking statements will not be realized. Readers of this MD&A are cautioned not to place undue reliance on these statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, estimates and intentions expressed in such forward-looking statements.

Forward-looking statements may be influenced by factors such as the level of exploration and development activity carried on by AKITA's customers; world crude oil prices and North American natural gas prices; weather; access to capital markets and government policies. We caution that the foregoing list of factors is not exhaustive and that investors and others should carefully consider the foregoing factors as well as other uncertainties and events prior to making a decision to invest in AKITA.  Except as required by law, the Company does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by it or on its behalf.

Selected financial information for the Company is as follows:

AKITA Drilling Ltd.





Interim Consolidated Statements of Financial Position













Unaudited


September 30,

September 30,

December 31,

$ Thousands


2015

2014

2014

Assets





Current Assets






Cash and cash equivalents


$

4,803

$

2,934

$

2,012


Accounts receivable


13,813

32,250

39,981


Income taxes recoverable


1,616

-

3,011


Prepaid expenses and other


457

497

257




20,689

35,681

45,261

Non-current Assets





Restricted cash


7,183

9,381

9,381

Other long-term assets


944

950

1,025

Investments in joint ventures


3,465

6,978

6,214

Property, plant and equipment


258,939

254,568

279,045

Total Assets


$

291,220

$

307,558

$

340,926













Liabilities





Current Liabilities






Operating loan facility


$

-

$

-

$

20,000


Accounts payable and accrued liabilities


6,865

21,856

28,589


Deferred revenue


32

364

175


Dividends payable


1,525

1,525

1,525




8,422

24,620

50,289

Non-current Liabilities





Financial instruments


140

261

226

Deferred income taxes


28,039

23,076

27,053

Deferred share units


265

108

91

Pension liability


3,750

2,839

3,426

Total Liabilities


40,616

50,904

81,085







Shareholders' Equity





Class A and Class B shares


23,871

23,871

23,871

Contributed surplus


3,878

3,470

3,557

Accumulated other comprehensive income (loss)


(280)

88

(280)

Retained earnings


223,135

229,225

232,693

Total Equity


250,604

256,654

259,841

Total Liabilities and Equity


$

291,220

$

307,558

$

340,926

 

AKITA Drilling Ltd.

Interim Consolidated Statements of Net Income (Loss) and


Comprehensive Income (Loss)



Three Months Ended

Nine Months Ended

Unaudited 

September 30, 

September 30, 

September 30, 

September 30, 

$ Thousands

2015

2014

2015

2014



Revenue

$

22,021

$

36,556

$

91,272

$

119,263






Costs and expenses






Operating and maintenance

14,158

25,141

59,260

78,676


Depreciation and amortization

8,922

7,088

26,266

22,208


Asset impairment loss

8,200

-

8,200

-


Selling and administrative

3,601

4,043

12,038

14,097

Total costs and expenses

34,881

36,272

105,764

114,981







Revenue less costs and expenses

(12,860)

284

(14,492)

4,282







Equity income from joint ventures

2,283

4,270

9,356

16,588







Other income (losses)






Interest income

32

43

100

142


Interest expense

(36)

(42)

(321)

(119)


Gain (loss) on sale of assets

50

381

(61)

499


Net other gains (losses)

123

210

385

118

Total other income (losses)

169

592

103

640






Income (loss) before income taxes

(10,408)

5,146

(5,033)

21,510






Income taxes

(2,827)

1,292

(50)

5,425






Net income (loss) and comprehensive income

(loss) for the period attributable to shareholders  

$

(7,581)

$

3,854

$

(4,983)

$

16,085











Earnings per Class A and Class B Share






Basic

$

(0.42)

$

0.21

$

(0.28)

$

0.90



Diluted

$

(0.42)

$

0.21

$

(0.28)

$

0.89

 

AKITA Drilling Ltd.






Interim Consolidated Statements of Cash Flows 





















 Three Months Ended 

 Nine Months Ended 

Unaudited


September 30, 

September 30, 

September 30, 

September 30, 

$ Thousands


2015

2014

2015

2014

Operating Activities






Net income (loss) and comprehensive income (loss)


$

(7,581)

$

3,854

$

(4,983)

$

16,085

Non-cash items included in net income (loss):







Depreciation and amortization


8,922

7,088

26,266

22,208


Asset impairment loss


8,200

-

8,200

-


Deferred income taxes


(1,429)

347

986

338


Expense for defined benefit pension plan


114

97

344

291


Expense for stock options and deferred share units 


75

154

495

393


(Gain) loss on sale of assets


(50)

(381)

61

(499)


Unrealized foreign currency (gain) loss


-

(402)

73

245


Unrealized (gain) loss on financial guarantee contracts


(26)

185

(86)

155

Funds flow from operations


8,225

10,942

31,356

39,216

Change in non-cash working capital:







Accounts receivable


(928)

(5,740)

26,168

10,092


Prepaid expenses and other


304

194

(200)

(132)


Income taxes recoverable


1,278

-

1,395

-


Accounts payable and accrued liabilities


(218)

3,720

(11,635)

5,515


Deferred revenue


(47)

288

(143)

30




8,614

9,404

46,941

54,721


Equity income from joint ventures


(2,283)

(4,270)

(9,356)

(16,588)


Pension benefits paid


(6)

(3)

(20)

(8)


Interest paid


-

(10)

(214)

(20)


Income taxes expense (recovery) - current


(1,398)

945

(1,036)

5,087


Income taxes paid (recovered)


1,398

(1,425)

1,036

(4,634)

Net cash from operating activities


6,325

4,641

37,351

38,558








Investing Activities






Capital expenditures 


(3,461)

(28,312)

(15,335)

(71,285)

Change in non-cash working capital related to capital


(2,663)

3,796

(9,948)

(2,749)

Distributions from investments in joint ventures


2,394

12,527

12,105

19,702

Change in cash restricted for loan guarantees


1,299

-

2,198

(3,431)

Change in term deposits


-

-

-

5,000

Proceeds on sale of assets


209

6,818

995

8,059

Net cash used in investing activities


(2,222)

(5,171)

(9,985)

(44,704)








Financing Activities






Change in operating loan facility


(2,500)

-

(20,000)

-

Dividends paid


(1,525)

(1,526)

(4,575)

(4,491)

Repurchase of share capital


-

-

-

(427)

Net cash used in financing activities


(4,025)

(1,526)

(24,575)

(4,918)








Increase (decrease) in cash and cash equivalents


78

(2,056)

2,791

(11,064)

Cash and cash equivalents, beginning of period


4,725

4,990

2,012

13,998








Cash and Cash Equivalents, End of Period


$

4,803

$

2,934

$

4,803

$

2,934

 

SOURCE AKITA Drilling Ltd.

Murray Roth, Vice President, Finance and Chief Financial OfficerCopyright CNW Group 2015


Source: Canada Newswire (November 3, 2015 - 6:45 PM EST)

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