TORONTO, Aug. 6, 2021 /CNW/ -
SECOND QUARTER HIGHLIGHTS
- Revenue for the second quarter of 2021 was $212.3 million, a nine percent increase from the
second quarter of 2020 revenue of $194.8
million.
- Revenue by geographic area:
-
- Canada - $31.4 million, 15 percent of total;
- United States - $130.8 million, 62 percent of total; and
- International - $50.1 million, 23
percent of total.
- Canadian drilling recorded 1,058 operating days in the second
quarter of 2021, an increase of 681 drilling days from 377
operating days in the second quarter of 2020. Canadian well
servicing recorded 8,027 operating hours in the second quarter of
2021, an increase of 4,432 operating hours from 3,595
operating hours in the second quarter of 2020.
- United States drilling
recorded 2,899 operating days in the second quarter of 2021, a 31
percent increase from 2,214 operating days in the second quarter of
2020. United States well servicing
recorded 33,080 operating hours in the second quarter of 2021, a 71
percent increase from 19,363 operating hours in the second quarter
of 2020.
- International drilling recorded 844 operating days in the
second quarter of 2021, a 20 percent increase from 704 operating
days recorded in the second quarter of 2020.
- Adjusted EBITDA for the second quarter of 2021 was $45.6 million, a 21 percent decrease from
Adjusted EBITDA of $58.1 million for
the second quarter of 2020.
- Funds flow from operations for the second quarter of 2021
increased 57 percent to $41.3 million
from $26.3 million in the second
quarter of the prior year.
- During the second quarter of 2021, the Company received a
$5.1 million Canada Emergency Wage Subsidy ("CEWS")
payment from the Government of Canada. The wage subsidy received partially
offset the decrease in Adjusted EBITDA and net loss attributable to
common shareholders.
- Net capital purchases for the second quarter of 2021 were
$11.8 million consisting of
$9.5 million in maintenance
capital, $4.0 million in upgrade
capital, offset by proceeds of $1.8
million from disposals. Planned capital expenditures for the
2021 year remain at $50.0 million, of
which approximately $40.0 million
will be maintenance capital.
- During the second quarter of 2021, the Company recognized
$6.0 million of standby revenue and
$2.7 million of contract cancellation
or early termination fees.
- General and administrative expense decreased 17 percent to
$8.9 million for the second quarter
of 2021 from $10.7 million for the
second quarter of 2020.
- Over the second quarter of 2021, US $9.1
million face value of Senior Notes were repurchased by the
Company in the open market for cancellation, recognizing
a gain of $2.1 million. (US
$1.7 million).
- Total debt for the second quarter of 2021 decreased by
$30.3 million to $1,333.4 million as of June 30, 2021, from $1,363.7 million as of March 31, 2021.
- On July 29, 2021, the Company
acquired Nabors Industries Ltd.'s fleet of 35 land-based drilling
rigs located in Canada, as well as
related equipment and certain real property for $117.5 million.
OVERVIEW
Revenue for the second quarter of 2021 was $212.3 million, an increase of nine percent from
revenue for the second quarter of 2020 of $194.8 million. Revenue for the six months ended
June 30, 2021 was $430.9 million, a decrease of 26 percent from
revenue for the six months ended June 30,
2020 of $578.6 million.
Adjusted EBITDA totaled $45.6
million ($0.28 per common
share) in the second quarter of 2021, 21 percent lower than
Adjusted EBITDA of $58.1
million ($0.36 per common
share) in the second quarter of 2020. For the first six months of
2021, Adjusted EBITDA totaled $95.5
million ($0.59 per common
share), 36 percent lower than Adjusted EBITDA of $149.3 million($0.92 per common share) in the first six months
of 2020.
Net loss attributable to common shareholders for the second
quarter of 2021 was $52.3 million
($0.32 per common share) compared to
a net loss attributable to common shareholders of $17.1 million ($0.10 per common share) for the second quarter of
2020. Net loss attributable to common shareholders for the six
months ended June 30, 2021 was
$95.8 million ($0.59 per common share), compared to a net loss
attributable to common shareholders of $46.3
million ($0.28 per common
share) for the six months ended June 30,
2020.
During the second quarter and the first half of 2021, the
Company received a $5.1 million and
$9.8 million of the Canada Emergency Wage Subsidy
("CEWS") from the Government of Canada respectively. The wage subsidies
received partially offset the decrease in Adjusted EBITDA and net
loss attributable to common shareholders.
Funds flow from operations increased 57 percent to $41.3 million ($0.25 per common share) in the second quarter of
2021 compared to $26.3 million
($0.16 per common share) in the
second quarter of the prior year. Funds flow from operations
decreased 21 percent to $87.9 million
($0.54 per common share) in the first
six months of 2021 compared to $110.8
million ($0.68 per common
share) in the first six months of the prior year.
Year to date in 2021, macro-economic conditions impacting the
oil and natural gas industry continued its effort to recover from
the significant fall out of the novel coronavirus
("COVID-19") pandemic. Rising vaccination rates in several
nations have resulted in governments and health authorities easing
travel and social distancing restrictions, increasing global
economic activity and mobility. While still below pre-COVID-19
pandemic levels, the easing of restrictions in combination with
rising global economic growth has resulted in a recovering demand
for crude oil. Furthermore, the oil and natural gas market
continues to be supported by OPEC+ nations' supply cuts. The
moderated supply in combination with rising demand has resulted in
supportive global commodity prices for oil and natural gas
producers, driving oilfield services activity improvements
year-over-year in the second quarter of 2021.
While activity has improved from 2020 lows in the second quarter
of 2021, industry operating conditions are still recovering from
the impacts of the COVID-19 pandemic. As a result, the Company's
operating and financial results continue to show residual impacts
resulting from the events of 2020.
Over the short term, there remains a degree of uncertainty
regarding the macro-economic conditions that will impact our
business including the resolution of the COVID-19 pandemic, the
degree and severity of COVID-19 restrictions, setbacks to COVID-19
vaccine distribution and efficacy, virus mutations, and other
factors that may impact the demand for crude oil and natural gas,
commodity prices, and the demand for oilfield services.
The Company's operating days were lower in the first six months
of 2021 when compared to the same period in 2020 as operations are
recovering from the significant and negative macroeconomic and
industry conditions seen since March of 2020 including but not
limited to, the impact of the COVID-19 pandemic and subsequent
lockdown related restrictions, resulting in decreased demand for
crude oil and increased market supply. The weakening year-over-year
of the United States dollar
against the Canadian dollar further negatively impacted
the United States and
international financial results on translation to Canadian dollars.
The average United States dollar
exchange rate was $1.25 for the first
six months of 2021 (2020 - $1.36)
versus the Canadian dollar, a decrease of eight percent, compared
to the same period of 2020.
Working capital at June 30, 2021 was a surplus of
$85.4 million, compared to a surplus
of $98.6 million at December 31, 2020. The Company's available
liquidity, consisting of cash and available borrowings under its
$900.0 million revolving credit
facility (the "Credit Facility"), was $116.9 million at June 30, 2021.
This news release contains "forward-looking information and
statements" within the meaning of applicable securities
legislation. For a full disclosure of the forward-looking
information and statements and the risks to which they are subject,
see the "Advisory Regarding Forward-Looking Statements" later in
this news release. This news release contains references to
Adjusted EBITDA and Adjusted EBITDA per common share. These
measures do not have any standardized meaning prescribed by IFRS
and accordingly, may not be comparable to similar measures used by
other companies. The non-GAAP measures included in this news
release should not be considered as an alternative to, or more
meaningful than, the IFRS measure from which they are derived or to
which they are compared. See "Non-GAAP Measures" later in this news
release.
FINANCIAL AND OPERATING HIGHLIGHTS
(Unaudited, in
thousands of Canadian dollars, except per common share data and
operating information)
|
Three months ended
June 30
|
|
|
Six months ended June
30
|
|
2021
|
|
|
2020
|
|
|
% change
|
|
|
2021
|
|
|
2020
|
|
|
% change
|
|
Revenue
|
$
|
212,306
|
|
|
$
|
194,759
|
|
|
9
|
|
|
$
|
430,850
|
|
|
$
|
578,620
|
|
|
(26)
|
|
Adjusted EBITDA
1
|
45,645
|
|
|
58,060
|
|
|
(21)
|
|
|
95,543
|
|
|
149,307
|
|
|
(36)
|
|
Adjusted EBITDA per
common share 1
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.28
|
|
|
$0.36
|
|
|
(22)
|
|
|
$0.59
|
|
|
$0.92
|
|
|
(36)
|
|
Diluted
|
$0.28
|
|
|
$0.36
|
|
|
(22)
|
|
|
$0.59
|
|
|
$0.92
|
|
|
(36)
|
|
Net loss attributable
to common shareholders
|
(52,292)
|
|
|
(17,077)
|
|
|
nm
|
|
|
(95,842)
|
|
|
(46,327)
|
|
|
nm
|
|
Net loss attributable
to common shareholders per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$(0.32)
|
|
|
$(0.10)
|
|
|
nm
|
|
|
$(0.59)
|
|
|
$(0.28)
|
|
|
nm
|
|
Diluted
|
$(0.32)
|
|
|
$(0.10)
|
|
|
nm
|
|
|
$(0.59)
|
|
|
$(0.28)
|
|
|
nm
|
|
Cash provided by
operating activities
|
53,185
|
|
|
127,432
|
|
|
(58)
|
|
|
80,022
|
|
|
190,164
|
|
|
(58)
|
|
Funds flow from
operations
|
41,326
|
|
|
26,338
|
|
|
57
|
|
|
87,853
|
|
|
110,833
|
|
|
(21)
|
|
Funds flow from
operations per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.25
|
|
|
$0.16
|
|
|
56
|
|
|
$0.54
|
|
|
$0.68
|
|
|
(21)
|
|
Diluted
|
$0.25
|
|
|
$0.16
|
|
|
56
|
|
|
$0.54
|
|
|
$0.68
|
|
|
(21)
|
|
Total long term
debt
|
1,333,369
|
|
|
1,555,274
|
|
|
(14)
|
|
|
1,333,369
|
|
|
1,555,274
|
|
|
(14)
|
|
Weighted average
common shares - basic (000s)
|
162,295
|
|
|
162,729
|
|
|
—
|
|
|
162,481
|
|
|
162,728
|
|
|
—
|
|
Weighted average
common shares - diluted (000s)
|
162,642
|
|
|
162,791
|
|
|
—
|
|
|
162,773
|
|
|
162,857
|
|
|
—
|
|
Drilling
|
2021
|
|
|
2020
|
|
|
% change
|
|
|
2021
|
|
|
2020
|
|
|
% change
|
Number of marketed
rigs 2
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
92
|
|
|
101
|
|
|
(9)
|
|
|
92
|
|
|
101
|
|
|
(9)
|
|
United
States
|
93
|
|
|
122
|
|
|
(24)
|
|
|
93
|
|
|
122
|
|
|
(24)
|
|
International
4
|
42
|
|
|
43
|
|
|
(2)
|
|
|
42
|
|
|
43
|
|
|
(2)
|
|
Total
|
227
|
|
|
266
|
|
|
(15)
|
|
|
227
|
|
|
266
|
|
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days
5
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
1,058
|
|
|
377
|
|
|
nm
|
|
|
2,904
|
|
|
3,479
|
|
|
(17)
|
|
United
States
|
2,899
|
|
|
2,214
|
|
|
31
|
|
|
5,480
|
|
|
7,355
|
|
|
(25)
|
|
International
4
|
844
|
|
|
704
|
|
|
20
|
|
|
1,703
|
|
|
2,142
|
|
|
(20)
|
|
Total
|
4,801
|
|
|
3,295
|
|
|
46
|
|
|
10,087
|
|
|
12,976
|
|
|
(22)
|
|
Well
Servicing
|
2021
|
|
|
2020
|
|
|
% change
|
|
|
2021
|
|
|
2020
|
|
|
% change
|
|
Number of
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
52
|
|
|
52
|
|
|
—
|
|
|
52
|
|
|
52
|
|
|
—
|
|
United
States
|
48
|
|
|
47
|
|
|
2
|
|
|
48
|
|
|
47
|
|
|
2
|
|
Total
|
100
|
|
|
99
|
|
|
1
|
|
|
100
|
|
|
99
|
|
|
1
|
|
Operating
hours
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
8,027
|
|
|
3,595
|
|
|
nm
|
|
|
17,117
|
|
|
15,827
|
|
|
8
|
|
United
States
|
33,080
|
|
|
19,363
|
|
|
71
|
|
|
63,045
|
|
|
50,570
|
|
|
25
|
|
Total
|
41,107
|
|
|
22,958
|
|
|
79
|
|
|
80,162
|
|
|
66,397
|
|
|
21
|
|
nm - calculation
not meaningful
|
1.
|
Refer to Adjusted
EBITDA calculation in Non-GAAP Measures
|
2.
|
Total owned rigs:
Canada - 118, United States - 136, International - 53 (2020 Total
owned rigs: Canada - 118, United States - 138, International -
48)
|
3.
|
Excludes coring
rigs.
|
4.
|
Includes workover
rigs.
|
5.
|
Defined as
contract drilling days, between spud to rig release.
|
FINANCIAL POSITION AND CAPITAL EXPENDITURES
HIGHLIGHTS
As at ($
thousands)
|
June 30
2021
|
|
|
December 31
2020
|
|
|
June 30
2020
|
|
Working
capital1
|
85,440
|
|
|
98,612
|
|
|
131,761
|
|
Cash
|
19,532
|
|
|
44,198
|
|
|
102,655
|
|
Long-term
debt
|
1,333,369
|
|
|
1,384,605
|
|
|
1,555,274
|
|
Total long-term
financial liabilities
|
1,339,933
|
|
|
1,390,647
|
|
|
1,564,652
|
|
Total
assets
|
2,857,832
|
|
|
3,054,493
|
|
|
3,387,104
|
|
Long-term debt to
long-term debt plus equity ratio
|
0.52
|
|
|
0.50
|
|
|
0.52
|
|
1 See Non-GAAP Measures
section.
|
|
Three months ended
June 30
|
|
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
|
2020
|
|
|
|
% change
|
|
|
|
2021
|
|
|
|
2020
|
|
|
|
% change
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upgrade/growth
|
4,043
|
|
|
|
48
|
|
|
|
nm
|
|
|
|
7,595
|
|
|
|
10,013
|
|
|
|
(24)
|
Maintenance
|
9,544
|
|
|
|
13,191
|
|
|
|
(28)
|
|
|
|
16,744
|
|
|
|
29,658
|
|
|
|
(44)
|
Proceeds
from disposals of property and equipment
|
(1,808)
|
|
|
|
(16,985)
|
|
|
|
(89)
|
|
|
|
(2,982)
|
|
|
|
(21,150)
|
|
|
|
(86)
|
Net capital
expenditures
|
11,779
|
|
|
|
(3,746)
|
|
|
|
nm
|
|
|
|
21,357
|
|
|
|
18,521
|
|
|
|
15
|
nm - calculation
not meaningful
|
REVENUE AND OILFIELD SERVICES EXPENSE
|
Three months ended
June 30
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
31,411
|
|
|
17,012
|
|
|
85
|
|
84,967
|
|
|
114,149
|
|
|
(26)
|
United
States
|
130,815
|
|
|
128,591
|
|
|
2
|
|
246,226
|
|
|
343,138
|
|
|
(28)
|
International
|
50,080
|
|
|
49,156
|
|
|
2
|
|
99,657
|
|
|
121,333
|
|
|
(18)
|
Total
revenue
|
212,306
|
|
|
194,759
|
|
|
9
|
|
430,850
|
|
|
578,620
|
|
|
(26)
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield services
expense
|
157,793
|
|
|
129,955
|
|
|
21
|
|
317,236
|
|
|
412,777
|
|
|
(23)
|
Revenue for the three months ended June 30, 2021 totaled
$212.3 million, an increase of nine
percent from the second quarter of 2020 of $194.8 million. Revenue for the six months ended
June 30, 2021 totaled $430.9
million, a 26 percent decrease from the six months ended
June 30, 2020.
The increase in total revenue during the second quarter of
2021 was primarily due to the global economic recovery and
improving industry fundamentals following the COVID-19 pandemic.
The increases in financial results from the Company's United States and international operations
were offset by the negative impact on the currency translation, as
the United States dollar weakened
relative to the Canadian dollar for the first six months ended
June 30, 2021.
CANADIAN OILFIELD SERVICES
Revenue increased 85 percent to $31.4
million for the three months ended June 30, 2021 from
$17.0 million for the three months
ended June 30, 2020. The Company recorded revenue of
$85.0 million in Canada for the first half of 2021, a decrease
of 26 percent from $114.1 million
recorded for the first half of 2020.
Canadian revenue accounted for 15 percent of the Company's total
revenue in the second quarter of 2021 (2020 - nine percent) and 20
percent for the first half of 2021 consistent with the prior year.
The Company recognized $1.2 million
of standby revenue in the second quarter of 2021 (2020 -
$0.4 million). During the first half
of 2021, the Company recognized $2.4
million of standby revenue (2020 - $0.5 million).
The Company's Canadian drilling operations recorded 1,058
operating days in the second quarter of 2021, compared to 377
operating days for the second quarter of 2020, an increase of
681 operating days. For the six months ended June 30, 2021,
the Company recorded 2,904 operating days compared to 3,479
drilling days for the six months ended June 30, 2020, a
decrease of 17 percent. Canadian well servicing hours increased
by 4,432 operating hours to 8,027 operating hours in the
second quarter of 2021 compared to 3,595 operating hours in the
corresponding period of 2020. For the six months ended
June 30, 2021, well servicing hours increased by eight percent
to 17,117 operating hours compared with 15,827 operating hours for
the six months ended June 30, 2020.
The operating and financial results for the Company's Canadian
operations for the first six months of 2021, were negatively
impacted by the significant effects of the COVID-19 pandemic on the
oil and natural gas industry, including supply and demand
fundamentals. Beginning in the second quarter of 2021, the
Company's Canadian operations began to see an increase in
activity due to the economic recovery, post the COVID-19 pandemic
severity peak.
During the first half of 2021, the Company moved nine
under-utilized drilling rigs into its Canadian operations reserve
fleet.
UNITED STATES OILFIELD
SERVICES
The Company's United States
operations recorded revenue of $130.8 million in the second
quarter of 2021, an increase of two percent from the $128.6 million recorded in the corresponding
period of the prior year. During the six months ended June 30,
2021, revenue of $246.2 million was
recorded, a decrease of 28 percent from the $343.1 million recorded in the corresponding
period of the prior year.
The Company's United States
operations accounted for 62 percent of the Company's revenue in the
second quarter of 2021 (2020 - 66 percent) and 57
percent of the Company's revenue in the first half of
2021 (2020 - 59 percent). In the United States, the Company recognized US
$3.8 million of standby revenue and
US $2.2 million of contract early
termination or cancellation fees in the second quarter of 2021
(2020 - US $3.3 million and US
$13.2 million, respectively). The
Company recognized US $7.0 million of
standby revenue and US $3.1 million
of contract cancellation fees in the first half of 2021 (2020 - US
$4.1 million and US $13.2 million respectively).
Drilling rig operating days increased to 2,899 operating days in
the second quarter of 2021 from 2,214 operating days in the second
quarter of 2020, and 5,480 operating days in the first half of
2021 from 7,355 operating days in the first half of 2020.
United States well servicing
hours, increased by 71 percent in the second quarter of 2021 to
33,080 operating hours from 19,363 operating hours in the second
quarter of 2020. For the first half of 2021, well servicing
activity increased 25 percent to 63,045 operating hours from 50,570
operating hours in the first half of 2020.
Overall operating and financial results for the Company's
United States operations for the
first half of 2021 were also negatively impacted by the significant
effects of the global COVID-19 pandemic, resulting in a decrease in
global oil demand and oversupply of oil and natural gas. Beginning
in the second quarter of 2021, the Company's United States operation began to see an
increase of activity due to the economic recovery, post the
COVID-19 pandemic severity peak. The financial results from the
Company's United States operations
were further negatively impacted on the currency translation, as
the United States dollar weakened
relative to the Canadian dollar for the first half of 2021.
During the first half of 2021, the Company acquired one well
servicing rig and moved 29 under-utilized drilling rigs into its
United States reserve fleet.
INTERNATIONAL OILFIELD SERVICES
The Company's international operations recorded revenue of
$50.1 million in the second quarter
of 2021, a two percent increase from the $49.2 million recorded in the corresponding
period of the prior year. International revenues for the six months
ended June 30, 2021, decreased 18 percent to $99.7 million from $121.3
million recorded in the six months ended June 30,
2020.
The Company's international operations contributed 23 percent of
the total revenue in the second quarter of 2021 (2020 - 25 percent)
and 23 percent of the Company's revenue in the first six months of
2021 (2020 - 21 percent). There were no standby or contract
cancellation fees in the Company's international operating region
in the second quarter of 2021 (2020 - US $7.1 million). The Company recognized US
$0.6 million of standby revenue
during the first half of 2021 (2020 - US $7.1 million).
International operating days for the three months ended
June 30, 2021, totaled 844 operating days compared to 704
operating days in the same period of 2020, an increase of 20
percent. For the six months ended June 30, 2021, international
operating days totaled 1,703 operating days compared to 2,142
operating days for the six months ended June 30, 2020, a
decrease of 20 percent. The acquisition of the prior non-owned
interest in the TDI joint venture during the third quarter of 2020
facilitated improved operating activity in the second quarter of
2021 when compared to the second quarter of 2020.
Similar to our North American operations, for the first six
months of 2021, international operating and financial results were
also negatively impacted by residual COVID-19 pandemic operating
conditions. The financial results from the Company's international
operations were further negatively impacted on the currency
translation, as the United States
dollar weakened relative to the Canadian dollar for the first half
of 2021.
During the first half of 2021, the Company moved six
under-utilized drilling rigs into its international operations
reserve fleet.
DEPRECIATION
|
Three months ended
June 30
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
Depreciation
|
69,756
|
|
|
92,165
|
|
|
(24)
|
|
140,733
|
|
|
181,950
|
|
|
(23)
|
Depreciation expense totaled $69.8
million for the second quarter of 2021 compared with
$92.2 million for the second quarter
of 2020, a decrease of 24 percent. Depreciation expense for the
first six months of 2021 decreased by 23 percent, to $140.7 million compared with $182.0 million in the first six months of 2020.
The decrease in depreciation is due to certain operating assets
having become fully depreciated whereafter no further depreciation
expense is incurred on such assets.
GENERAL AND ADMINISTRATIVE
|
Three months ended
June 30
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
General and
administrative
|
8,868
|
|
|
10,741
|
|
|
(17)
|
|
18,071
|
|
|
22,545
|
|
|
(20)
|
% of
revenue
|
4.2
|
|
|
5.5
|
|
|
|
|
4.2
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense decreased seventeen percent
to $8.9 million (4.2 percent of
revenue) for the second quarter of 2021 compared to $10.7 million (5.5 percent of revenue) for the
second quarter of 2020. For the six months ended June 30,
2021, general and administrative expense totaled $18.1 million (4.2 percent of revenue) compared
to $22.5 million (3.9 percent of
revenue) for the six months ended June 30,
2020. General and administrative expense decreased as a
result of cost saving initiatives implemented in response to the
COVID-19 pandemic, the wage subsidy received from the Government of
Canada, reductions in personnel,
and organizational restructuring.
RESTRUCTURING
|
Three months ended
June 30
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
Restructuring
|
—
|
|
|
6,509
|
|
|
nm
|
|
3,533
|
|
|
7,386
|
|
|
(52)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - calculation
not meaningful
|
For the six months ended June 30,
2021, restructuring costs were $3.5 million (2020 -
$7.4 million). Restructuring expense
consists of costs relating to the organizational restructuring of
the Company due to the significant decline in oilfield services
activity as a result of the COVID-19 pandemic.
FOREIGN EXCHANGE AND OTHER LOSS (GAIN)
|
Three months ended
June 30
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
Foreign exchange and
other loss (gain)
|
6,313
|
|
|
(4,426)
|
|
|
nm
|
|
12,627
|
|
|
4,660
|
|
|
nm
|
nm - calculation
not meaningful
|
Included in this amount is the impact of foreign currency
fluctuations in the Company's subsidiaries that have functional
currencies other than the Canadian dollar.
GAIN ON REPURCHASE OF UNSECURED SENIOR NOTES
|
Three months ended
June 30
|
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
|
2020
|
|
|
|
% change
|
|
|
2021
|
|
|
|
2020
|
|
|
|
% change
|
Gain on repurchase of
unsecured Senior Notes
|
(2,139)
|
|
|
|
(52,023)
|
|
|
|
(96)
|
|
|
(7,431)
|
|
|
|
(63,517)
|
|
|
|
(88)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30,
2021, the Company repurchased US $9.1
million (2020 - US $57.0
million) of face value unsecured Senior Notes ("Senior
Notes"), in the open market, for cancellation and recorded a
gain on repurchase of $2.1 million
(US $1.7 million) (2020 -
$52.0 million).
For six months ended June 30,
2021, the Company repurchased US $25.7 million (2020 - US $74.8 million) of face value Senior Notes, in the
open market, for cancellation and recorded a gain on repurchase of
$7.4 million (US $5.9 million) (2020 - $63.5 million).
INTEREST EXPENSE
|
Three months ended
June 30
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
Interest
expense
|
23,576
|
|
|
26,976
|
|
|
(13)
|
|
47,033
|
|
|
58,846
|
|
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense was incurred on the Company's $900.0 million Credit Facility, US $417.5 million Senior Notes, $37.0 million subordinate convertible debentures
(the "Convertible Debentures"), and capital lease
obligations. Included in interest expense for the second quarter of
2021, is $0.5 million of accrued
interest relating to the Senior Notes, paid in cash as part of the
repurchase of the Senior Notes (2020 - $1.2
million).
Financing charges decreased by $3.4
million for the second quarter of 2021 compared to the
second quarter of 2020 and decreased by $11.8 million for the first six months of 2021
compared to the same period of 2020. The decrease is the result of
a reduction in overall borrowing. The positive translational impact
on United States
dollar-denominated debt further decreased interest expense for the
quarter.
The Company's blended interest rate on its outstanding debt for
the 2021 year will be approximately seven percent. The current
capital structure primarily consisting of the Credit Facility and
the Senior Notes allows the Company to utilize funds flow generated
to reduce debt in the near term with greater flexibility than a
more non-callable weighted capital structure.
INCOME TAXES (RECOVERY)
|
Three months ended
June 30
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
Current taxes income
(recovery)
|
476
|
|
|
(11)
|
|
|
nm
|
|
526
|
|
|
449
|
|
|
17
|
Deferred taxes income
(recovery)
|
(11,428)
|
|
|
(7,431)
|
|
|
54
|
|
(20,772)
|
|
|
(10,855)
|
|
|
91
|
Total income taxes
(recovery)
|
(10,952)
|
|
|
(7,442)
|
|
|
47
|
|
(20,246)
|
|
|
(10,406)
|
|
|
95
|
Effective income tax
rate (%)
|
18.1
|
|
|
30.3
|
|
|
(40)
|
|
17.9
|
|
|
18.7
|
|
|
(4)
|
The effective income tax rate for the three months ended
June 30, 2021 was 18.1 percent compared to 30.3
percent for the three months ended June 30, 2020. The
effective income tax rate for the six months ended
June 30, 2021 was 17.9 percent compared to 18.7
percent for the six months ended June 30, 2020. The
effective income tax rate in the first half of the current year was
lower than the effective income tax rate in the same period of 2020
due to activity levels in foreign tax jurisdictions.
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL
($ thousands,
except per common share data)
|
Three months ended
June 30
|
|
Six months ended June
30
|
2021
|
|
|
2020
|
|
|
% change
|
|
2021
|
|
|
2020
|
|
|
% change
|
Cash provided by
operating activities
|
53,185
|
|
|
127,432
|
|
|
(58)
|
|
80,022
|
|
|
190,164
|
|
|
(58)
|
Funds flow from
operations
|
41,326
|
|
|
26,338
|
|
|
57
|
|
87,853
|
|
|
110,833
|
|
|
(21)
|
Funds flow from
operations per common share
|
$0.25
|
|
|
$0.16
|
|
|
56
|
|
$0.54
|
|
|
$0.68
|
|
|
(21)
|
Working capital
1
|
85,440
|
|
|
98,612
|
|
|
(13)
|
|
85,440
|
|
|
98,612
|
|
|
(13)
|
1
Comparative figure as at December 31, 2020
|
During the three months ended June 30, 2021, the Company
generated funds flow from operations of $41.3 million ($0.25 per common share) compared to funds flow
from operations of $26.3 million
($0.16 per common share) for the
three months ended June 30, 2020, an increase of 57 percent.
For the six months ended June 30, 2021, the Company generated
funds flow from operations of $87.9
million ($0.54 per common
share) a decrease of 21 percent from $110.8
million ($0.68 per common
share) for the six months ended June 30, 2020. The decrease in
funds flow from operations for six months ended June 30, 2021 compared to the same period of 2020
is due to the operating conditions seen since March of 2020.
At June 30, 2021, the Company's working capital was a
surplus of $85.4 million, compared to
a working capital surplus of $98.6
million at December 31, 2020. The Company currently
expects funds generated by operations, combined with current and
future credit facilities, to fully support the Company's current
operating and capital requirements. The Company's Credit Facility
provides for total borrowings of $900.0
million, of which $97.3
million was undrawn and available at June 30, 2021.
INVESTING ACTIVITIES
|
Three months ended
June 30
|
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
|
2021
|
|
|
2020
|
|
|
% change
|
Purchase of property
and equipment
|
(13,587)
|
|
|
(13,239)
|
|
|
3
|
|
|
(24,339)
|
|
|
(39,671)
|
|
|
(39)
|
Proceeds from
disposals of property and equipment
|
1,808
|
|
|
16,985
|
|
|
(89)
|
|
|
2,982
|
|
|
21,150
|
|
|
(86)
|
Net change in
non-cash working capital
|
4,041
|
|
|
(3,504)
|
|
|
nm
|
|
|
1,003
|
|
|
4,249
|
|
|
(76)
|
Cash used in
investing activities
|
(7,738)
|
|
|
242
|
|
|
nm
|
|
|
(20,354)
|
|
|
(14,272)
|
|
|
43
|
nm - calculation not
meaningful
|
Net purchases of property and equipment for the second quarter
of 2021 totaled $11.8 million
(2020 - net proceeds of $3.7
million). Net purchases of property and equipment during the
first six months of 2021 totaled $21.4
million (2020 - $18.5
million). The purchase of property and equipment for the
first six months of 2021 consists of $16.7
million in maintenance capital and $7.6 million in upgrade capital.
FINANCING ACTIVITIES
|
Three months ended
June 30
|
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
2020
|
|
|
% change
|
|
|
2021
|
|
|
2020
|
|
|
% change
|
Proceeds from
long-term debt
|
29,935
|
|
|
41,163
|
|
|
(27)
|
|
|
38,531
|
|
|
94,289
|
|
|
(59)
|
Repayments of
long-term debt
|
(50,799)
|
|
|
(50,005)
|
|
|
2
|
|
|
(66,563)
|
|
|
(105,477)
|
|
|
(37)
|
Lease obligation
principal
repayments
|
(1,746)
|
|
|
(2,957)
|
|
|
(41)
|
|
|
(3,227)
|
|
|
(5,627)
|
|
|
(43)
|
Interest
paid
|
(34,318)
|
|
|
(49,177)
|
|
|
(30)
|
|
|
(49,851)
|
|
|
(61,144)
|
|
|
(18)
|
Purchase of common
shares held in trust
|
(224)
|
|
|
667
|
|
|
nm
|
|
|
(484)
|
|
|
(556)
|
|
|
(13)
|
Cash
dividends
|
—
|
|
|
(9,787)
|
|
|
nm
|
|
|
—
|
|
|
(19,574)
|
|
|
nm
|
Cash used in
financing activities
|
(57,152)
|
|
|
(70,096)
|
|
|
(18)
|
|
|
(81,594)
|
|
|
(98,089)
|
|
|
(17)
|
nm - calculation not
meaningful
|
The Company's available bank facilities consist of a
$900.0 million Credit Facility, of
which $97.3 million was available and
undrawn as of June 30, 2021. In
addition, the Company has available US $50.0
million secured letter of credit facility, of which US
$16.0 million was available as of
June 30, 2021.
On March 29, 2021, the Company has
amended the terms of the Convertible Debentures to:
- extend the Maturity Date from January
31, 2022 to May 1, 2023;
- increase the interest rate from 7.00% to 7.75% per annum;
and
- reduce the Conversion Price from $7.00 to $1.75.
The Company may at any time and from time to time acquire Senior
Notes for cancellation by means of open market repurchases or
negotiated transactions. The Company is limited in the acquisition
and cancellation of the Senior Notes up to $25.0 million under applicable covenants. Senior
Notes may be repurchased for redemption in excess of $25.0 million if certain criteria are met. During
the three months ended June 30, 2021,
the Company purchased US $9.1 million
of face value Senior Notes for cancellation, in the open
market.
Covenants
The following is a list of the Company's currently applicable
covenants and the calculations as at June
30, 2021:
|
Covenant
|
|
|
June 30,
2021
|
The Credit
Facility
|
|
|
|
|
Consolidated
EBITDA1
|
> 140.0
million
|
|
|
207,202
|
Consolidated EBITDA to
Consolidated Interest Expense1,2
|
≥ 1.50
|
|
|
2.31
|
Consolidated Senior
Debt to Consolidated EBITDA1,3
|
≤ 4.00
|
|
|
3.78
|
1
|
Please refer to
Non-GAAP Measures for Consolidated EBITDA
definition.
|
2
|
Consolidated Interest
Expense is defined as all interest expense calculated on twelve
month rolling consolidated basis and excluding Senior Notes
interest in repurchase.
|
3
|
Consolidated Senior
Debt is defined as Consolidated Total Debt minus Subordinated
Debt.
|
As at June 30, 2021, the Company
was in compliance with all covenants related to the Credit
Facility.
The Credit Facility
The Credit Facility agreement, available on SEDAR including
amendments, requires that the Company comply with certain covenants
including minimum Consolidated EBITDA requirements, Consolidated
EBITDA to Consolidated Interest Expense ratio and a Consolidated
Senior Debt to Consolidated EBITDA ratio as detailed above.
The Credit Facility also contains certain covenants that place
restrictions on the Company's ability to repurchase or redeem
Senior Notes and Convertible Debentures, to create, incur or assume
additional indebtedness; change the Company's primary business;
enter into mergers or amalgamations; and dispose of property. In
the most recent amendment to the Credit Facility, dated
December 31, 2020, the permitted
encumbrances were reduced from $75.0
million to $25.0 million.
The Senior Notes
The indenture governing the Senior Notes, available on SEDAR,
contains certain restrictions and exemptions on the Company's
ability to pay dividends, purchase and redeem shares and
subordinated debt of the Company, and make certain restricted
investments. Limitations on these restrictions are tempered by the
existence of a number of exceptions to the general prohibition,
including baskets allowing for restricted payments.
The indenture also restricts the ability to incur additional
indebtedness if the Fixed Charge Coverage Ratio determined on a pro
forma basis for the most recently ended four fiscal quarter period
for which internal financial statements are available is not at
least 2.0 to 1.0. As of June 30,
2021, the Company has not incurred additional indebtedness
that would require the Fixed Charge Coverage Ratio to be
calculated. As is the case with restricted payments, there are a
number of exceptions to this prohibition on the incurrence of
indebtedness, including the incurrence of debt under credit
facilities up to the greater of $900.0
million or 22.5 percent of the Company's consolidated
tangible assets and of additional secured debt subordinated to the
credit facilities up to the greater of US $125.0 million or 4.0 percent of the Company's
consolidated tangible assets.
NEW BUILDS AND MAJOR RETROFITS
During the first half of 2021, the Company added one well
servicing rig to the United States
fleet and moved nine, 29 and six under-utilized drilling rigs to
its Canadian, the United States,
and international operations reserve fleets respectively.
The Company is currently directing capital expenditures to
primarily maintenance capital items and selective upgrades.
OUTLOOK
Industry Overview
The outlook for oilfield services has improved year-over-year as
the crude oil and natural gas industry continues to recover from
the adverse impact of the COVID-19 pandemic. Rising vaccination
rates globally have contributed to circumstances that tend to
support the recovery of crude oil demand, resulting in meaningful
crude oil inventory declines. Recovering oil demand coupled with
OPEC+ nations' moderated crude oil supply have resulted in strong
global commodity prices throughout the second quarter of 2021, with
the benchmark price of West Texas Intermediate ("WTI")
averaging US $62 in April, US
$65 in May, US $71 in June and, despite recent weakness,
averaging $72 in July.
We expect vaccine progress and oil demand recovery coupled with
a sustained commodity price environment will continue to drive
oilfield services activity improvements year-over-year. However, we
continue to expect a multi-year recovery cycle for our industry to
achieve pre-COVID-19 pandemic activity levels and operating
conditions. Particularly in our United
States operating region, increases to activity have been
incremental, as oil and natural gas producers have moderated
capital spending, remain committed to cash generation, maintain
current production levels, and continue to prioritize shareholder
returns. We expect producers to modestly revisit drilling programs
through 2021 as legacy wells decline in production with more
meaningful increases in activity in 2022.
Furthermore, short-term uncertainty remains regarding the
macroeconomic conditions, including commodity price fluctuations,
setbacks in COVID-19 vaccine deployment or vaccine efficacy, the
pace of oil demand recovery, and OPEC+ production and supply
decisions that may impact the short-term demand for oil field
services.
On July 29, 2021, the Company
acquired Nabors Industries Ltd.'s fleet of 35 land-based drilling
rigs located in Canada, as well as
related equipment and certain real property for $117.5 million. Ensign funded the purchase price
with cash on hand and available Credit Facility. The Company views
this acquisition as a strategic and opportunistic transaction,
given the asset value, exposure to key and active basins in
Canada, enhanced customer mix, and
current contract book. The Company expects to achieve modest
synergies resulting from the acquisition.
The Company remains committed to strategic capital allocation
and debt retirement. The Company's budgeted capital expenditures
for 2021, excluding the above mentioned Nabors' acquisition, remain
at approximately $50.0 million,
composed of primarily maintenance and strategic upgrade capital
items.
Canadian Activity
Canadian activity, representing 20 percent of total revenue year
to date, declined from the first to the second quarter of 2021 as
operations entered seasonal spring break-up. We expect activity to
significantly improve in the third quarter as a result of
operations exiting seasonal spring break-up, improving industry
conditions, and the acquisition of Nabors' 35 land-based drilling
rigs.
As of June 30, 2021, of our 92
marketed Canadian drilling rigs, approximately 34 percent are
engaged under term contracts of various durations. Approximately 45
percent of our contracted rigs have a remaining term of six months
or longer, although they may be subject to early termination.
United States Activity
United States activity,
representing 57 percent of total revenue year to date, modestly
improved over the second quarter. We expect US activity to remain
steady and continue to modestly improve throughout the third and
fourth quarters of 2021.
As of June 30, 2021, of our 93
marketed United States drilling
rigs, approximately 35 percent are engaged under term contracts of
various durations. Approximately 33 percent of our contracted rigs
have a remaining term of six months or longer, although they may be
subject to early termination.
International Activity
International activity, representing 23 percent of total revenue
year to date, remained stable over the second quarter and is
expected to modestly improve over the third quarter due to
anticipated activity gains in the Australian region. Operations in
Argentina are expected to remain
flat at current levels with one rig active. In the Middle East, our operations are expected to
remain steady through the third quarter with four rigs active.
Australian operations remained steady over the second quarter and
are expected to modestly improve in the third quarter.
As of June 30, 2021, of our 42
marketed international drilling rigs, approximately 31 percent are
engaged under term contracts of various durations. Approximately 77
percent of our contracted rigs have a remaining term of six months
or longer, although they may be subject to early
termination.
RISK AND UNCERTAINTIES
This document contains forward-looking statements based upon
current expectations that involve a number of business risks and
uncertainties. The factors that could cause results to differ
materially include, but are not limited to, the impact of the
COVID-19 virus, the potential reinstatement COVID-19 mitigation
strategies, such as stay-at-home orders and lockdown related
restrictions, virus mutations, economic and market conditions,
crude oil and natural gas prices, political events, foreign
currency fluctuations, weather conditions, the Company's defense of
lawsuits and other claims, and the ability of oil and natural gas
companies to pay accounts receivable balances and raise capital or
other unforeseen conditions which could ongoing impact on the use
of the services supplied by the Company. For a more detailed
description of the risk factors and uncertainties that face the
Company and the industry in which it operates, refer to the "Risks
and Uncertainties" section of our current Management's Discussion
& Analysis and the section titled "Risk Factors" in our current
Annual Information Form.
CONFERENCE CALL
A conference call will be held to discuss the Company's second
quarter 2021 results at 10:00 a.m.
MDT (12:00 p.m. EDT) on
Friday, August 6, 2021. The
conference call number is 1-416-764-8659 (in Toronto) or 1-888-664-6392 (outside
Toronto). A taped recording will
be available until August 13, 2021 by
dialing 1-416-764-8677 (in Toronto) or 1-888-390-0541 (outside
Toronto) and entering the
reservation number 069310#. A live broadcast may be accessed
through the Company's website at
www.ensignenergy.com/presentations.
Ensign Energy Services Inc. is an international oilfield
services contractor and is listed on the Toronto Stock Exchange
under the trading symbol ESI.
Ensign Energy Services Inc.
Consolidated Statements
of Financial Position
As at
|
|
June 30
2021
|
|
|
December 31
2020
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
|
$
|
19,532
|
|
|
$
|
44,198
|
Accounts
receivable
|
|
162,149
|
|
|
164,395
|
Inventories, prepaid
and other
|
|
48,359
|
|
|
52,679
|
Income taxes
receivable
|
|
486
|
|
|
290
|
Total current
assets
|
|
230,526
|
|
|
261,562
|
Property and
equipment
|
|
2,471,685
|
|
|
2,649,702
|
Deferred income
taxes
|
|
155,621
|
|
|
143,229
|
Total
assets
|
|
$
|
2,857,832
|
|
|
$
|
3,054,493
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
accruals
|
|
$
|
129,794
|
|
|
$
|
146,011
|
Share-based
compensation
|
|
1,269
|
|
|
251
|
Income taxes
payable
|
|
8,476
|
|
|
8,429
|
Current portion of
lease obligation
|
|
5,547
|
|
|
8,259
|
Total current
liabilities
|
|
145,086
|
|
|
162,950
|
|
|
|
|
|
Share-based
compensation
|
|
8,149
|
|
|
2,743
|
Long-term
debt
|
|
1,333,369
|
|
|
1,384,605
|
Lease
obligations
|
|
6,564
|
|
|
6,042
|
Deferred income
taxes
|
|
117,721
|
|
|
128,276
|
Non-controlling
interest
|
|
4,736
|
|
|
4,853
|
Total
liabilities
|
|
1,615,625
|
|
|
1,689,469
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Shareholders'
capital
|
|
231,054
|
|
|
230,354
|
Contributed
surplus
|
|
22,585
|
|
|
23,324
|
Equity component of
convertible debenture
|
|
2,380
|
|
|
3,193
|
Accumulated other
comprehensive income
|
|
209,154
|
|
|
235,277
|
Retained
earnings
|
|
777,034
|
|
|
872,876
|
Total shareholders'
equity
|
|
1,242,207
|
|
|
1,365,024
|
Total liabilities and
shareholders' equity
|
|
$
|
2,857,832
|
|
|
$
|
3,054,493
|
Ensign Energy Services Inc.
Consolidated Statements
of Loss
|
|
Three months
ended
|
|
|
Six months
ended
|
|
|
June 30
2021
|
|
|
June 30
2020
|
|
|
June 30
2021
|
|
|
June 30
2020
|
(Unaudited - in
thousands of Canadian dollars, except per common share
data)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
212,306
|
|
|
$
|
194,759
|
|
|
$
|
430,850
|
|
|
$
|
578,620
|
Expenses
|
|
|
|
|
|
|
|
|
Oilfield
services
|
|
157,793
|
|
|
129,955
|
|
|
317,236
|
|
|
412,777
|
Depreciation
|
|
69,756
|
|
|
92,165
|
|
|
140,733
|
|
|
181,950
|
General and
administrative
|
|
8,868
|
|
|
10,741
|
|
|
18,071
|
|
|
22,545
|
Restructuring
|
|
—
|
|
|
6,509
|
|
|
3,533
|
|
|
7,386
|
Share-based
compensation
|
|
5,820
|
|
|
2,879
|
|
|
6,822
|
|
|
(1,621)
|
Foreign exchange and
other loss (gain)
|
|
6,313
|
|
|
(4,426)
|
|
|
12,627
|
|
|
4,660
|
Total
expenses
|
|
248,550
|
|
|
237,823
|
|
|
499,022
|
|
|
627,697
|
Loss before
interest expense, accretion of deferred financing charges and other
(gains) losses and income taxes
|
(36,244)
|
|
|
(43,064)
|
|
|
(68,172)
|
|
|
(49,077)
|
|
|
|
|
|
|
|
|
|
Loss from investment
in joint ventures
|
|
—
|
|
|
127
|
|
|
—
|
|
|
1,785
|
Gain on repurchase of
unsecured Senior Notes
|
|
(2,139)
|
|
|
(52,023)
|
|
|
(7,431)
|
|
|
(63,517)
|
Loss on asset
sale
|
|
—
|
|
|
3,437
|
|
|
—
|
|
|
3,437
|
Interest
expense
|
|
23,576
|
|
|
26,976
|
|
|
47,033
|
|
|
58,846
|
Accretion of deferred
financing charges
|
|
2,704
|
|
|
2,971
|
|
|
5,407
|
|
|
5,943
|
Loss before income
taxes
|
|
(60,385)
|
|
|
(24,552)
|
|
|
(113,181)
|
|
|
(55,571)
|
Income taxes
(recovery)
|
|
|
|
|
|
|
|
|
Current income taxes
(recovery)
|
|
476
|
|
|
(11)
|
|
|
526
|
|
|
449
|
Deferred income taxes
(recovery)
|
|
(11,428)
|
|
|
(7,431)
|
|
|
(20,772)
|
|
|
(10,855)
|
Total income tax
recovery
|
|
(10,952)
|
|
|
(7,442)
|
|
|
(20,246)
|
|
|
(10,406)
|
Net loss from
continuing operations
|
|
(49,433)
|
|
|
(17,110)
|
|
|
(92,935)
|
|
|
(45,165)
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations
|
|
(2,899)
|
|
|
(127)
|
|
|
(2,899)
|
|
|
(1,254)
|
Net
loss
|
|
$
|
(52,332)
|
|
|
$
|
(17,237)
|
|
|
$
|
(95,834)
|
|
|
$
|
(46,419)
|
Net loss
attributable to:
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
(52,292)
|
|
|
(17,077)
|
|
|
(95,842)
|
|
|
(46,327)
|
Non-controlling
interests
|
|
(40)
|
|
|
(160)
|
|
|
8
|
|
|
(92)
|
|
|
(52,332)
|
|
|
(17,237)
|
|
|
(95,834)
|
|
|
(46,419)
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.32)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.59)
|
|
|
$
|
(0.28)
|
Diluted
|
|
$
|
(0.32)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.59)
|
|
|
$
|
(0.28)
|
Ensign Energy Services Inc.
Consolidated Statements
of Cash Flows
|
|
Three months
ended
|
|
|
Six months
ended
|
|
|
June 30
2021
|
|
|
June 30
2020
|
|
|
June 30
2021
|
|
|
June 30
2020
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(52,332)
|
|
|
$
|
(17,237)
|
|
|
$
|
(95,834)
|
|
|
$
|
(46,419)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation
|
|
69,756
|
|
|
92,165
|
|
|
140,733
|
|
|
181,950
|
Loss from investment
in joint ventures
|
|
—
|
|
|
127
|
|
|
—
|
|
|
1,785
|
Loss on asset
sale
|
|
—
|
|
|
3,437
|
|
|
—
|
|
|
3,437
|
Gain on purchase of
unsecured Senior Notes
|
|
(2,139)
|
|
|
(52,023)
|
|
|
(7,431)
|
|
|
(63,517)
|
Share-based
compensation
|
|
5,820
|
|
|
2,879
|
|
|
6,822
|
|
|
(1,621)
|
Unrealized foreign exchange and other
|
|
5,369
|
|
|
(25,526)
|
|
|
11,895
|
|
|
(18,716)
|
Accretion of deferred
financing charges
|
|
2,704
|
|
|
2,971
|
|
|
5,407
|
|
|
5,943
|
Interest
expense
|
|
23,576
|
|
|
26,976
|
|
|
47,033
|
|
|
58,846
|
Deferred income taxes
recovery
|
|
(11,428)
|
|
|
(7,431)
|
|
|
(20,772)
|
|
|
(10,855)
|
Funds flow from
operations
|
|
41,326
|
|
|
26,338
|
|
|
87,853
|
|
|
110,833
|
Net change in
non-cash working capital
|
|
11,859
|
|
|
101,094
|
|
|
(7,831)
|
|
|
79,331
|
Cash provided by
operating activities
|
|
53,185
|
|
|
127,432
|
|
|
80,022
|
|
|
190,164
|
Investing
activities
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
(13,587)
|
|
|
(13,239)
|
|
|
(24,339)
|
|
|
(39,671)
|
Proceeds from
disposals of property and equipment
|
|
1,808
|
|
|
16,985
|
|
|
2,982
|
|
|
21,150
|
Net change in
non-cash working capital
|
|
4,041
|
|
|
(3,504)
|
|
|
1,003
|
|
|
4,249
|
Cash (used in)
provided by investing activities
|
|
(7,738)
|
|
|
242
|
|
|
(20,354)
|
|
|
(14,272)
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from
long-term debt
|
|
29,935
|
|
|
41,163
|
|
|
38,531
|
|
|
94,289
|
Repayments of
long-term debt
|
|
(50,799)
|
|
|
(50,005)
|
|
|
(66,563)
|
|
|
(105,477)
|
Lease obligation
principle repayments
|
|
(1,746)
|
|
|
(2,957)
|
|
|
(3,227)
|
|
|
(5,627)
|
Interest
paid
|
|
(34,318)
|
|
|
(49,177)
|
|
|
(49,851)
|
|
|
(61,144)
|
Purchase of common
shares held in trust
|
|
(224)
|
|
|
667
|
|
|
(484)
|
|
|
(556)
|
Cash
dividends
|
|
—
|
|
|
(9,787)
|
|
|
—
|
|
|
(19,574)
|
Cash used in
financing activities
|
|
(57,152)
|
|
|
(70,096)
|
|
|
(81,594)
|
|
|
(98,089)
|
Net (decrease)
increase in cash
|
|
(11,705)
|
|
|
57,578
|
|
|
(21,926)
|
|
|
77,803
|
Effects of foreign
exchange on cash
|
|
(2,179)
|
|
|
(3,483)
|
|
|
(2,740)
|
|
|
(3,556)
|
Cash – beginning
of period
|
|
33,416
|
|
|
48,560
|
|
|
44,198
|
|
|
28,408
|
Cash – end of
period
|
|
$
|
19,532
|
|
|
$
|
102,655
|
|
|
$
|
19,532
|
|
|
$
|
102,655
|
Ensign Energy Services Inc.
Non-GAAP Measures
Adjusted EBITDA, Adjusted EBITDA per common share and
Consolidated EBITDA. These measures do not have any standardized
meaning prescribed by IFRS and accordingly, may not be comparable
to similar measures used by other companies. The non-GAAP measures
included in this press release should not be considered as an
alternative to, or more meaningful than, the IFRS measure from
which they are derived or to which they are compared.
Adjusted EBITDA is used by management and investors to analyze
the Company's profitability based on the Company's principle
business activities prior to how these activities are financed, how
assets are depreciated, amortized and how the results are taxed in
various jurisdictions. Additionally, in order to focus on the core
business alone, amounts are removed related to foreign exchange,
share-based compensation expense, the sale of assets, restructuring
costs, gain on repurchase of unsecured Senior Notes and fair value
adjustments on financial assets and liabilities, as the Company
does not deem these to relate to its core drilling and well
services business. Adjusted EBITDA is not intended to represent net
loss as calculated in accordance with IFRS.
ADJUSTED
EBITDA
|
Three months ended
June 30
|
|
|
|
Six months ended June
30
|
($
thousands)
|
2021
|
|
|
|
2020
|
|
|
|
2021
|
|
|
|
2020
|
Loss before income
taxes
|
(60,385)
|
|
|
|
(24,552)
|
|
|
|
(113,181)
|
|
|
|
(55,571)
|
Add-back/(deduct):
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
23,576
|
|
|
|
26,976
|
|
|
|
47,033
|
|
|
|
58,846
|
Accretion of deferred
financing charges
|
2,704
|
|
|
|
2,971
|
|
|
|
5,407
|
|
|
|
5,943
|
Depreciation
|
69,756
|
|
|
|
92,165
|
|
|
|
140,733
|
|
|
|
181,950
|
Restructuring
|
—
|
|
|
|
6,509
|
|
|
|
3,533
|
|
|
|
7,386
|
Loss from investment in
joint ventures
|
—
|
|
|
|
127
|
|
|
|
—
|
|
|
|
1,785
|
Share-based compensation
|
5,820
|
|
|
|
2,879
|
|
|
|
6,822
|
|
|
|
(1,621)
|
Loss on
asset sale
|
—
|
|
|
|
3,437
|
|
|
|
—
|
|
|
|
3,437
|
Gain on
repurchase of unsecured Senior Notes 1
|
(2,139)
|
|
|
|
(52,023)
|
|
|
|
(7,431)
|
|
|
|
(63,517)
|
Foreign
exchange and other loss (gain)
|
6,313
|
|
|
|
(4,426)
|
|
|
|
12,627
|
|
|
|
4,660
|
Adjusted
EBITDA from investment in joint ventures
|
—
|
|
|
|
3,997
|
|
|
|
—
|
|
|
|
6,009
|
Adjusted
EBITDA
|
45,645
|
|
|
|
58,060
|
|
|
|
95,543
|
|
|
|
149,307
|
1 See "Interest
Expense" section for definition of Senior Notes.
|
Consolidated EBITDA
Consolidated EBITDA, as defined in the Company's Credit Facility
agreement, is used in determining the Company's compliance with its
covenants. The Consolidated EBITDA is substantially similar to
Adjusted EBITDA. Consolidated EBITDA is calculated on a rolling
twelve-month basis.
Working Capital
Working capital is defined as current assets less current
liabilities as reported on the consolidated statements of financial
position.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document constitute forward-looking
statements or information (collectively referred to herein as
"forward-looking statements") within the meaning of applicable
securities legislation. Forward-looking statements generally can be
identified by the words "believe", "anticipate", "expect", "plan",
"estimate", "target", "continue", "could", "intend", "may",
"potential", "predict", "should", "will", "objective", "project",
"forecast", "goal", "guidance", "outlook", "effort", "seeks",
"schedule" or other expressions of a similar nature suggesting
future outcome or statements regarding an outlook.
Disclosure related to expected future commodity pricing or
trends, revenue rates, equipment utilization or operating activity
levels, operating costs, capital expenditures and other prospective
guidance provided throughout this document, including, but not
limited to, information provided in the "Funds Flow from Operations
and Working Capital" section regarding the Company's expectation
that funds generated by operations combined with current and future
credit facilities will support current operating and capital
requirements, information provided in the "New Builds and Major
Retrofits" section, information provided in the "Financial
Instruments" section regarding Venezuela and information provided in the
"Outlook" section regarding the general outlook for the remainder
of 2021, are examples of forward-looking statements. These
statements are not representations or guarantees of future
performance and are subject to certain risks and unforeseen
results. The reader should not place undue reliance on
forward-looking statements as there can be no assurance that the
plans, initiatives, projections, anticipations or expectations upon
which they are based will occur.
The forward-looking statements are based on current assumptions,
expectations, estimates and projections about the Company and the
industries and environments in which the Company operates, which
speak only as of the date such statements were made or as of the
date of the report or document in which they are contained. These
assumptions include, among other things: the fluctuation in oil
prices may pressure customers into reducing or limiting their
drilling budgets; the status of current negotiations with the
Company's customers and vendors; customer focus on safety
performance; existing term contracts are neither renewed nor
terminated prematurely; the Company's ability to provide services
on a timely basis; successful integration of acquisitions; and the
general stability of the economic and political environments in the
jurisdictions where we operate.
The forward-looking statements are subject to known and unknown
risks, uncertainties and other factors that could cause the actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risk factors
include, among others: general economic and business conditions
which will, among other things, impact demand for and market prices
of the Company's services and the ability of the Company's
customers to pay accounts receivable balances; volatility of and
assumptions regarding crude oil and natural gas commodity prices;
fluctuations in currency and interest rates; economic conditions in
the countries and regions in which the Company conducts business;
political uncertainty and civil unrest; the Company's ability to
implement its business strategy; impact of competition and industry
conditions; determinations by OPEC and other countries regarding
production levels; changes to laws and regulations; the Company's
defence of lawsuits; availability and cost of labour and other
equipment, supplies and services; the Company's ability to complete
its capital programs; operating hazards and other difficulties
inherent in the operation of the Company's oilfield services
equipment; availability and cost of financing and insurance; access
to credit facilities and debt capital markets; the Company's
ability to amend covenants under the Credit Facility with its
Credit Facility syndicate, timing and success of integrating the
business and operations of acquired companies; actions by
governmental authorities; government regulations and the
expenditures required to comply with them (including safety and
environmental laws and regulations and the impact of climate change
initiatives on capital and operating costs); the adequacy of the
Company's provision for taxes; the impact of, and the Company's
response to, the global COVID-19 pandemic and the success of
vaccinations for COVID-19; foreign operations; foreign exchange
exposure and interest rate changes; workforce and reliance on key
management; technology; seasonality and weather; ability to
successfully integrate acquisitions; and the impact thereof upon
the business environments in which the Company is or may become
engaged; and other circumstances affecting the Company's business,
revenues and expenses. The Company's operations and levels of
demand for its services have been, and at times in the future may
be, affected by political risks and developments, such as
expropriation, nationalization, or regime change, and by national,
regional and local laws and regulations such as changes in taxes,
royalties and other amounts payable to governments or governmental
agencies, environmental protection regulations, the global COVID-19
pandemic, the potential reinstatement or removal of COVID-19
mitigation strategies, such as stay-at-home orders and lockdown
related restrictions, and the impact thereof upon the Company, its
customers and its business. Should one or more of these risks or
uncertainties materialize, or should any of the Company's
assumptions prove incorrect, actual results from operations may
vary in material respects from those expressed or implied by the
forward-looking statements. The impact of any one factor on a
particular forward-looking statement is not determinable with
certainty as such factors are interdependent upon other factors,
and the Company's course of action would depend upon its assessment
of the future considering all information then available. For
additional information, refer to the "Risk and
Uncertainties" section of this MD&A.
Although the Company believes the expectations conveyed by the
forward-looking statements are reasonable based on information
available to it on the date such forward-looking statements are
made, no assurances can be given as to future results, levels of
activity and achievements. Readers are cautioned that the lists of
important factors contained herein are not exhaustive.
Unpredictable or unknown factors not discussed in this MD&A
could also have material adverse effects on forward-looking
statements and the Company's results from operations. Further
additional information on the risk factors that could affect the
Company's business, operations or financial results are included in
reports on file with applicable securities regulatory authorities,
including but not limited to the Company's Annual Information Form
for the year ended December 31, 2020,
which may be accessed on SEDAR at www.sedar.com.
The forward-looking statements contained in this MD&A are
expressly qualified in their entirety by this cautionary statement.
The forward-looking statements contained herein are made as of the
date hereof and the Company undertakes no obligation to update
publicly or revise any forward-looking statements or information,
whether as a result of new information, future events or otherwise,
except as required by law.
SOURCE Ensign Energy Services Inc.