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 November 4, 2015 - 6:58 PM EST
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Xtreme Drilling and Coil Services Reports Third Quarter 2015 Financial Results

CALGARY, ALBERTA--(Marketwired - Nov. 4, 2015) - (TSX:XDC) - Xtreme Drilling and Coil Services Corp. ("Xtreme", the "Company") announce third quarter 2015 financial and operating results. It is anticipated that filing will take place on SEDAR of unaudited Consolidated Financial Statements and Notes to the unaudited Consolidated Financial Statements as well as Management's Discussion and Analysis for the three months ended September 30, 2015, by Thursday November 5, 2015.

Q3 2015 Highlights

(amounts in thousands of Canadian dollars, unless otherwise noted)

  • Adjusted EBITDA of $15.4 million in the third quarter of 2015 on total revenue of $52.2 million, an increase from $15.0 million on $53.7 million in the prior quarter. The increase in adjusted EBITDA as compared to the second quarter was driven by improved operating margins in the coil services segment, decreased general and administrative expenses as well as a stronger US Dollar.

  • For the third quarter, the Drilling Segment achieved utilization of 55% on 1,069 operating days. This was comprised of a 55% utilization rate for the 16 rig US XDR fleet, 27% for the three rig Canadian XDR fleet and 97% for the two rigs operating in India. The lower utilization in the Drilling Segment for the quarter was driven by 77, or 9%, fewer operating days in the US, offset by 74 more operating days in Canada as compared to the second quarter.

  • For the third quarter, the Coil Services Segment achieved utilization of 76% for the active units on 390 operating days. This was comprised of a 96% utilization rate for the two XSR units in Saudi Arabia and a 64% utilization rate for the five actively marketed XSR units in the US.

  • The Drilling Segment (which includes US, Canada and India) operating profit decreased to $10.9 million in the third quarter of 2015 as compared to $13.6 million in the prior quarter. The decrease for the quarter was attributable to $3.8 million less in total revenue for the segment. Overall operating margin decreased to 36.6% as compared to 40.5% in the second quarter of 2015. The decreased operating margin is attributable to fixed field support costs that did not decrease at the same level as revenue.

  • The Coil Services Segment (which includes US and Saudi Arabia) operating profit was $8.9 million in the third quarter of 2015 as compared to $6.8 million in the prior quarter. This was driven primarily by $1.7 million higher revenue in the US operations on 13 additional operating days as well as higher average revenue per day. Overall the Coil Services Segment achieved an operating margin of 39.5% as compared to 33.6% for the prior quarter on increased revenue and greater cost controls. 

  • The Company finished the third quarter of 2015 with $110.0 million in total debt and $93.3 million in net debt (total debt less cash). The funded debt to EBITDA ratio was 1.6x and the net debt to EBITDA ratio was 1.3x. At quarter end, the Company had significant liquidity with approximately $66 million available on the revolving credit facility and $29.4 million in working capital which includes $16.7 million of cash. On a US Dollar basis, in which the Company primarily borrows, the funded debt decreased $18.0 million USD during the quarter to an ending balance of $82.5 million USD and net debt was $72.0 million on a US Dollar basis.

  • Total capital expenditures were $1.5 million during the third quarter of 2015 and $17.2 million on a year to date basis. The majority of this was spent on the completion of a new XSR coiled tubing unit and continued work on the final XSR unit in this build program. The Company anticipates delivering the final new build XSR unit in November. This will bring the total to four new units from the current XSR build program. Currently the 2015 capital budget stands at $22 million which includes all sustaining, critical spare and upgrade capital for the existing fleet as well as the requirements to complete the three XSR new build units delivered in 2015. Xtreme anticipates that 2015 capital expenditures will be funded exclusively through operating cash flow.

  • During the third quarter the Company recognized $4.8 million in early termination revenue on take or pay contracts. Year to date Xtreme has recognized $11.0 million in early termination revenue. The Company anticipates recording approximately $1.6 million in the fourth quarter of 2015. At quarter end, the Company had approximately 1,560 days contracted under term contracts across the fleet.

  • The Company reviews the carrying value of its long-lived assets at each reporting period for indicators of impairment. During the period ended September 30, 2015, the decline in oil and natural gas prices resulted in significant decreases in industry activity, adversely impacting current and expected future business and estimated recoverable amounts. As a result of the indicators, the Company performed a comprehensive assessment of the carrying values of property and equipment. The recoverable amount of each cash generating unit was determined using a value in use calculation based on cash flow projections using multi-year discounted cash flow projections. In its assessment, the Company determined that property and equipment was impaired by $44,000.

(Stated in thousands of Canadian dollars, except per share, utilization, and rig amounts)

(unaudited)

Three months ended   Sep 30, 2015   Jun 30, 2015   Mar 31, 2015   Dec 31, 2014
Revenue   52,238   53,668   70,015   69,459
Adjusted EBITDA 1   15,444   15,036   20,761   18,617
Adjusted EBITDA as a percentage of Revenue   29   28   30   27
Adjusted EBITDA per share 1 - basic ($)   0.18   0.18   0.25   0.23
Net (loss) income   (48,853)   (776)   2,755   (2,258)
Net (loss) income per share - basic ($)   (0.59)   (0.01)   0.03   (0.03)
Capital assets   445,591   473,030   488,300   452,974
Total assets   528,120   567,050   592,194   547,958
Net debt 2   93,489   112,133   126,869   115,520
Operating days 1   1,459   1,451   1,823   2,053
Utilization (percentage) - XDR   55   56   73   86
Utilization (percentage) - XSR   60   61   71   74
Utilization (percentage) - Total   56   57   73   83
Weighted average rigs in service   30.0   30.0   30.0   28.0
Total rigs, end of quarter   30   30   30   29
                 
                 
    Sep 30, 2014   Jun 30, 2014   Mar 31, 2014   Dec 31, 2013
Revenue   65,980   62,299   69,703   62,681
Adjusted EBITDA 1   18,299   19,421   20,635   19,734
Adjusted EBITDA as a percentage of Revenue   28   31   30   31
Adjusted EBITDA per share 1 - basic ($)   0.22   0.24   0.25   0.24
Net income (loss)   853   (902)   2,896   (7,441)
Net income(loss) per share - basic ($)   0.01   (0.01)   0.04   (0.09)
Capital assets   443,304   413,296   423,204   412,523
Total assets   536,713   513,651   532,116   515,720
Net debt 2   116,768   105,358   125,389   116,856
Operating days 1   2,173   1,779   2,130   2,141
Utilization (percentage) - XDR   92   75   90   93
Utilization (percentage) - XSR   73   68   78   76
Utilization (percentage) - Total   88   73   88   90
Weighted average rigs in service   28.0   28.0   28.0   28.0
Total rigs, end of quarter   28   28   28   28
1 See Non-GAAP measures
2 Total debt less cash and cash equivalents

Excerpt from Management's Discussion and Analysis for the three and nine months ended September 30, 2015

OUTLOOK

The oilfield service market continued to remain challenged in the third quarter as the U.S. active rig count fell to 775 rigs and is now down by 1,154 units, or 60%, from this time last year. As mentioned by others in the industry, current pricing is down by 25% to 35% in the U.S. drilling market from this time twelve months ago. Along with the decrease in pricing there remains very little visibility into 2016 customer activity. Many customers are currently finalizing borrowing bases and attempting to forecast liquidity for next year. The combination of depressed oil and gas prices along with efficiency gains achieved through tier 1 drilling rigs should place a ceiling on the number of rigs required in 2016. For this reason Xtreme management continues to believe that North American drilling will likely not see a material increase in utilization until late 2016 with pricing likely to remain flat into 2017. 

Xtreme currently has 10 of 21 XDR drilling rigs earning revenue in the United States, Canada and India with an 11th rig scheduled to commence operations in the next week. This level of activity, while down from last year, is better than the industry average. Although utilization and revenue have decreased, Xtreme's XDR operations management team has done an excellent job reducing costs and building efficiencies in the business. Actual operating margins in the XDR segment through three quarters of 2015 are similar to the same period in 2014. The Company anticipates that as activity levels approach a trough over the next couple of quarters that XDR operating margins will slightly decrease with activity and pricing.

While the outlook for domestic drilling is muted the resiliency of the US XSR business has been very encouraging. This division has exceeded forecasted revenue and operating margin year to date and the remainder of the fourth quarter looks to continue that trend. The market appears to be validating Xtreme's technological advantage over other coiled tubing providers. This is evidenced by the fact that the Company has increased the customer base by 100% over the past 12 months as there are now 62 E&P companies that the Company has active master service agreements with in South and West Texas. When operators begin to complete the large inventory of drilled but uncompleted wells Xtreme should be strongly positioned to increase activity levels and gain market share.

The US XSR division recently completed several technical achievements that created significant value for the respective customer and continued to add to the Company's impressive track record. In the third quarter the Company milled out plugs in a horizontal section of 12,450 feet with 2 5/8" coiled tubing from a vertical kick off point of 6,500 feet. In addition, the Company recently milled 52 plugs without a short trip utilizing a single bottom hole assembly. In total Xtreme has performed more than 75 million round trip running feet with 2 5/8" coiled tubing since commencing operations in Texas in 2012. Over this period the trend in most major resource plays has been to increase the length of the horizontal section in order to increase well productivity. In response to customer demand Xtreme has continued to improve its industry leading technology and recently introduced a trailer configuration that is able to transport 27,000 feet of 2 5/8" coiled tubing. Unlike other large coil providers Xtreme has the ability to deploy to these depths due to its technologically advanced A/C injector and proprietary electronic logic control system. In the fourth quarter the Company anticipates performing work on a well that is in excess of 24,000 feet and will represent the longest length reached in Xtreme's history.

In the third quarter the Company continued to aggressively strengthen the balance sheet by paying down $18 million USD of debt and finished with $83.5 million USD of funded debt and $72 million USD of net debt. The funded debt to EBITDA ratio was 1.6x at quarter end well below the 2.75 threshold in the Company's credit facility. This is significantly better than many of Xtreme's publicly traded oilfield service peers. Management will continue to emphasize de-leveraging and maintaining optimal liquidity through the current industry downturn.

Conference Call Details

The Company expects to announce third quarter 2015 financial and operating results after market close on Wednesday, November 4, 2015 with a follow‐up conference call planned for Thursday, November 5, 2015 at 9:00 am MDT, 10:00 am CT. Tom Wood, Chief Executive Officer, will host the conference call with participation from Matt Porter, President and Chief Financial Officer, and will answer questions from analysts and investors. To participate in the conference call, please dial in as follows approximately ten minutes before the start time in your time zone.

+1 800-396-7098 (North America Toll‐Free) or +1 416-340-8530 (Alternate)

Webcast link: http://www.gowebcasting.com/6941

An audio replay of the call will be available until Thursday, November 12, 2015. To access the replay, call +1 800‐408‐3053 or +1 905‐694‐9451 and enter pass code 5530799.


Xtreme Drilling and Coil Services Corp.
       
Interim Consolidated Statements of Financial Position        
(in thousands of Canadian dollars)        
(unaudited)        
         
    Sep 30, 2015     Dec 31, 2014  
Assets            
Current assets            
  Cash and cash equivalents   16,652     13,102  
  Accounts receivable   35,625     51,125  
  Other receivables   203     255  
  Prepaid expenses and other   1,121     1,998  
  Inventory   9,707     11,405  
    63,308     77,885  
Non-current assets            
Deferred tax asset   15,835     13,486  
Property and equipment   445,591     452,974  
Intangible assets   3,386     3,613  
Total Assets   528,120     547,958  
             
Liabilities and Equity            
Current liabilities            
  Accounts payable and accrued liabilities   29,456     39,738  
  Income tax payable   4,358     1,365  
  Current portion of provision   -     1,740  
    33,814     42,843  
Long-term liabilities            
Long-term debt   110,041     128,622  
Total Liabilities   143,855     171,465  
             
Shareholders' equity            
Share capital   331,075     330,964  
Share option reserve   17,011     14,803  
Accumulated deficit   (59,103 )   (12,487 )
Foreign currency translation reserve   95,282     43,213  
Total Shareholders' Equity   384,265     376,493  
Total Liabilities and Shareholders' Equity   528,120     547,958  
             
             
             
       
             
Xtreme Drilling and Coil Services Corp.
Interim Consolidated Statements of (Loss) Income
For the three and nine months ended September 30, 2015 and 2014
(in thousands of Canadian dollars, except share and per share data)
(unaudited)
     
    Three months ended   Nine months ended
    Sep 30, 2015     Sep 30, 2014   Sep 30, 2015     Sep 30, 2014
Revenue   52,238     65,980   175,921     197,982
                     
Expenses                    
Operating expenses   32,462     44,102   111,024     127,552
General and administrative expenses   4,332     3,579   13,656     12,075
                     
Depreciation of property and equipment   15,789     11,524   44,469     38,082
Amortization of intangibles   76     76   228     228
Impairment of property and equipment   43,742     -   43,742     -
Stock-based compensation   958     799   2,232     2,186
Foreign exchange loss   217     124   362     199
(Gain) loss on disposal of equipment   (159 )   421   (277 )   4,324
Other (income) expenses   (5 )   6   (3 )   18
Interest expense   1,205     1,052   3,466     3,344
(Loss) Income before tax for the period   (46,379 )   4,297   (42,978 )   9,974
                     
Tax expense (benefit)                    
Current   2,746     2,402   5,723     4,905
Deferred   (530 )   1,042   (2,085 )   2,222
Total tax expense   2,216     3,444   3,638     7,127
                     
Net (loss) income for the period   (48,595 )   853   (46,616 )   2,847
                     
                     
Net (loss) income per common share                    
- basic   (0.59 )   0.01   (0.57 )   0.03
- diluted   (0.59 )   0.01   (0.57 )   0.03
                     
Weighted average number of common shares                    
- basic   81,833,645     81,755,211   81,807,571     81,513,030
- diluted   81,987,985     82,627,732   81,971,167     82,443,110
                     
 
 
Xtreme Drilling and Coil Services Corp.  
Interim Consolidated Statements of Comprehensive (Loss) Income  
For the three and nine months ended September 30, 2015 and 2014  
(in thousands of Canadian dollars)  
(unaudited)  
   
    Three months ended   Nine months ended  
    Sep 30, 2015     Sep 30, 2014   Sep 30, 2015     Sep 30, 2014  
Net (loss) income for the period   (48,595 )   853   (46,616 )   2,847  
Other comprehensive income                      
Items that may be subsequently reclassified to profit or loss                      
Unrealized gain on translating financial statements of foreign operations   25,380     15,527   52,069     16,098  
Dividends declared to non-controlling interest partner   -     -   -     (1,332 )
Comprehensive (loss) income for the period   (23,215 )   16,380   5,453     17,613  
                       
   
   
Xtreme Drilling and Coil Services Corp.  
Interim Consolidated Statements of Changes in Equity  
For the nine months ended September 30, 2015 and 2014  
(in thousands of Canadian dollars)  
(unaudited)  
   
    Equity attributable to the owners of the parent          
           
                       
    Share capital   Share option reserve     Accumulated deficit     Foreign currency translation reserve   Total   Non-controlling interest   Total Shareholders' Equity  
Balance at Jan 1, 2014   328,416   12,419     (12,697 )   15,143   343,281   953   344,234  
Net income for the year   -   -     2,847     -   2,847   -   2,847  
Other comprehensive income   -   -     -     -   -   -   -  
  Currency translation differences   -   -     -     16,098   16,098   -   16,098  
  Dividends declared to noncontrolling interest partner   -   -     -     -   -   (1,332 ) (1,332 )
  Settlement for the purchase of non-controlling interest partner   -   -     (379 )   -   (379 ) 379   -  
Total comprehensive income   -   -     2,468     16,098   18,566   (953 ) 17,613  
Employee share option scheme:                                  
  Value of employee services   889   2,198     -     -   3,087   -   3,087  
  Proceeds from shares issued   1,864   (889 )   -     -   975   -   975  
Total transactions with owners   2,753   1,309     -     -   4,062   -   4,062  
Balance at Sep 30, 2014   331,169   13,728     (10,229 )   31,241   365,909   -   365,909  
Balance at Jan 1, 2015   330,964   14,803     (12,487 )   43,213   376,493   -   376,493  
Net (loss) income for the year   -   -     (46,616 )   -   (46,616 ) -   (46,616 )
Other comprehensive income                                  
  Currency translation differences   -   -     -     52,069   52,069   -   52,069  
Total comprehensive income   -   -     (46,874 )   52,069   5,453   -   5,453  
Employee share option scheme:                                  
  Value of employee services   33   2,241     -     -   2,274   -   2,274  
  Proceeds from shares issued   78   (33 )   -     -   45   -   45  
Total transactions with owners   111   2,208     -     -   2,319   -   2,319  
Balance at Sep 30, 2015   331,075   17,011     (59,103 )   95,282   384,265   -   384,265  
                                   
                                   

Xtreme Drilling and Coil Services Corp.
Interim Consolidated Statements of Cash Flows
For the nine months ended September 30, 2015 and 2014
 
(in thousands of Canadian dollars)  
(unaudited)  
  2015   2014  
Cash flow provided by:        
Operating activities        
Net (loss) income for the period (46,616 ) 2,847  
  Interest paid (3,164 ) (2,438 )
  Taxes paid (7,255 ) (2,495 )
Items not affecting cash:        
  Depreciation and amortization 44,696   38,310  
  Impairment of property and equipment 43,742   -  
  Stock-based compensation 2,232   2,186  
  (Gain) loss on disposal of equipment (277 ) 4,324  
  Provision for doubtful accounts (757 ) (110 )
  Interest expense 3,466   3,344  
  Amortization of debt issuance costs 398   338  
  Foreign exchange loss 362   199  
  Current tax expense 5,723   4,905  
  Deferred tax (benefit) expense (2,085 ) 2,222  
  Changes in items of working capital 11,948   11,995  
Net cash generated from operating activities 52,413   65,627  
Financing activities        
  Proceeds from exercise of stock options 86   1,864  
  Proceeds from long-term debt 6,579   -  
  Repayment of long-term debt (44,545 ) (9,366 )
  Debt issuance costs -   (96 )
Net cash used in financing activities (37,880 ) (7,598 )
Investing activities        
  Proceeds from sale of equipment 509   1,067  
  Capital expenditures (17,242 ) (54,106 )
  Buyout of non-controlling interest partner (1,962 ) (13,263 )
  Changes in items of working capital relating to capital items (2,636 ) 8,380  
Net cash used in investing activities (21,295 ) (57,922 )
Effect of exchange rate changes on cash and cash equivalents 10,312   (2,699 )
         
Increase (decrease) in cash and cash equivalents 3,550   (2,592 )
Cash and cash equivalents - beginning of period 13,102   12,220  
         
Cash and cash equivalents - end of period 16,652   9,628  
         
         
Xtreme Drilling and Coil Services Corp.
EBITDA and Adjusted EBITDA
For the three and nine months ended September 30, 2015 and 2014
(in thousands of Canadian dollars)
(unaudited)
  Three months ended Nine months ended
  Sep 30, 2015   Sep 30, 2014 Sep 30, 2015   Sep 30, 2014
Net (loss) income (48,595 ) 853 (46,616 ) 8,008
Tax expense 2,216   3,444 3,638   6,343
Interest expense 1,205   1,052 3,466   5,278
Amortization of intangibles 76   76 228   228
Depreciation of property and equipment 15,789   11,524 44,469   30,381
Impairment of property and equipment 43,742   - 43,742   -
EBITDA 14,433   16,949 48,927   50,238
             
  Three months ended Nine months ended
  Sep 30, 2015   Sep 30, 2014 Sep 30, 2015   Sep 30, 2014
EBITDA 14,433   16,949 48,927   50,238
             
Adjustments for non-cash items 1,011   1,350 2,316   6,727
Adjusted EBITDA 15,444   18,299 51,241   58,355
Adjusted EBITDA per share ($) - basic 0.19   0.22 0.63   0.72
Net (loss) income per share ($) - basic (0.59 ) 0.01 (0.57 ) 0.03
  Three months ended Nine months ended
  Sep 30, 2015   Sep 30, 2014 Sep 30, 2015   Sep 30, 2014
Stock-based compensation 958   799 2,232   2,186
(Gain) loss on disposal of equipment (159 ) 421 (277 ) 4,324
Foreign exchange loss 217   124 362   199
Other (income) expense (5 ) 6 (3 ) 18
Total adjustments for non-cash items 1,011   1,350 2,316   6,727

Reader Advisory

This news release contains forward-looking statements ("FLS"). The use of the words "may", "believe", "could", "would", "might", "will be taken", "occur" or "be achieved" and similar expressions identify 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. 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 November 4, 2015, 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, or to explain any material difference between subsequent actual events and such FLS.

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, Saudi Arabia and India. For more information about the Company, please visit www.xtremecoil.com.

Xtreme Drilling and Coil Services Corp.
Matt Porter
President and Chief Financial Officer
+1 281 994 4600
ir@xtremecoil.com
www.xtremecoil.com


Source: Marketwired (Canada) (November 4, 2015 - 6:58 PM EST)

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