CALGARY, March 18 /CNW/ - Earnings for the year ended December 31, 2008 were $14,847,000 or $0.81 per share on revenue of $137,246,000. Comparative figures for 2007 were $20,752,000 or $1.14 per share on revenue of $141,962,000. Funds flow from continuing operations for the current year was $34,149,000 as compared to $37,143,000 in 2007.
The Company's rig utilization in 2008 was 42.2% compared to the industry average of 41.7% and AKITA's utilization of 40.9% in 2007. This weak industry wide level of rig utilization dramatically influences the Company's ability to obtain premium pricing for its services. Consequently, AKITA turned some of its attention to new opportunities as a means of optimizing its strong asset base. Early in the year, one rig was deployed from Alaska to Colorado, representing the first time AKITA moved a rig south of Canada. The Company is also performing drilling services for customers having a focus on potash rather than AKITA's traditional oil and natural gas markets.
During the year, the Company took several steps to strengthen its overall fleet. In the first quarter, one 2,000 metre double rig was retired. AKITA disposed of one of its 5,000 metre triple rigs in the second quarter as well as its well servicing business. These reductions related to underperforming assets. During the third quarter, AKITA entered into a multi-year contract with a major customer and spent the balance of the year upgrading two of its rigs in order to fulfil this obligation. In the fourth quarter, a new 3,200 metre double rig was completed at a cost of $7.3 million.
In addition to operational strength, the Company maintains significant financial strength, which has placed the Company in a strong position to weather the current market conditions. At December 31, 2008 the Company had $63.1 Million in working capital ($3.46 per share) including $42.2 Million in cash ($2.31 per share) and no long-term debt. As well, the carrying value for the Company's fleet was only $146.9 Million ($3.9 Million per rig). Although the evaluation of replacement cost for AKITA's fleet has not been performed, management is confident that the cost to replace the Company's fleet is significantly higher than its carrying value.
Management does not anticipate a significant improvement in market conditions for its rigs until the prices of world crude oil and North American natural gas are sustained at higher levels. Nevertheless, the oil and gas well drilling industry is highly cyclical and, as demonstrated in 2008, higher oil and gas prices could re-emerge at some point in the future. AKITA continues to be very well positioned, having highly trained and dedicated personnel operating first-class equipment. Moreover, the Company's conservative cash management strategy has ensured that the high quality of service that our customers have received in the past does not have to be compromised.
Selected financial information for the Company is as follows:
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Consolidated Balance Sheets
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December 31 ($000's of Canadian Dollars) 2008 2007
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Assets
Current assets
Cash and cash equivalents $ 42,168 $ 43,166
Accounts receivable 41,534 22,505
Other 1,123 272
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84,825 65,943
Restricted cash 5,000 5,000
Capital assets 153,044 152,579
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$242,869 $223,522
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Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 20,061 $ 13,051
Dividends payable 1,276 1,279
Income taxes payable 399 873
Deferred revenue - 1,617
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21,736 16,820
Future income taxes 18,818 15,055
Pension liability 3,854 3,609
Class A and Class B Shareholders' Equity
Class A and Class B shares 23,312 23,369
Contributed surplus 2,271 1,110
Retained earnings 172,878 163,559
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198,461 188,038
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$242,869 $223,522
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Consolidated Statements of Earnings,
Comprehensive Income and Retained Earnings
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Year ended December 31 ($000's of Canadian
Dollars, except per share amounts) 2008 2007
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Revenue $137,246 $141,962
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Costs and expenses
Operating and maintenance 87,123 84,185
Depreciation 16,667 15,164
Selling and administrative 16,336 15,426
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120,126 114,775
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Revenue less costs and expenses 17,120 27,187
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Other income (expense)
Interest income 1,814 1,392
Gain on sale of joint venture interests in
rigs and other assets 673 902
Gain (loss) on foreign currency translation 526 (814)
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3,013 1,480
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Earnings before income taxes 20,133 28,667
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Income taxes
Current 3,384 6,486
Future 3,763 1,039
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7,147 7,525
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Earnings from continuing operations 12,986 21,142
Gain on disposal from discontinued operations,
net of tax 1,941 -
Discontinued operations, net of tax (80) (390)
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Net earnings and comprehensive income 14,847 20,752
Retained earnings, beginning of year 163,559 148,781
Dividends declared (5,111) (5,117)
Adjustment on repurchase and
cancellation of share capital (417) (857)
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Retained earnings, end of year $172,878 $163,559
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Earnings per Class A and Class B share from
continuing operations
Basic $ 0.71 $ 1.16
Diluted $ 0.71 $ 1.15
Earnings per Class A and Class B share
Basic $ 0.81 $ 1.14
Diluted $ 0.81 $ 1.13
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Consolidated Statements of Cash Flows
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Year ended December 31 ($000's of Canadian
Dollars) 2008 2007
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Operating activities
Net earnings $ 12,986 $ 21,142
Non-cash items included in earnings
Depreciation 16,667 15,164
Future income taxes 3,763 1,039
Expense for defined benefit pension plan 245 242
Stock options charged to expense 1,161 458
Gain on sale of joint venture interests in
rigs and other assets (673) (902)
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Funds flow from continuing operations 34,149 37,143
Cash provided from (to) discontinued operations 24 (151)
Change in non-cash working capital (14,806) 1,884
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19,367 38,876
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Investing activities
Capital expenditures (19,567) (40,948)
Proceeds on sales of joint venture interests
in rigs and other assets 1,435 7,443
Proceeds on sales of discontinued assets 3,510 -
Cash restricted for loan guarantees - (5,000)
Change in non-cash working capital (158) (1,081)
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(14,780) (39,586)
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Financing activities
Dividends paid (5,111) (5,117)
Repurchase of share capital (474) (928)
Change in non-cash working capital - (6)
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(5,585) (6,051)
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Decrease in cash (998) (6,761)
Cash position, beginning of year 43,166 49,927
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Cash position, end of year $ 42,168 $ 43,166
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Interest paid during the year $ 48 $ 376
Income taxes paid during the year $ 4,377 $ 11,400
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FORWARD-LOOKING STATEMENTS
From time to time Akita Drilling Ltd. ("AKITA" or the "Company") makes written and verbal forward-looking statements. These forward-looking statements include but are not limited to comments with respect to our objectives and strategies, financial condition, the results of our operations and business, our outlook for industry and our risk management discussion. Forward looking statements are typically identified with words such as "believe", "expect", "forecast", "anticipate", "intend", "estimate", "plan" and "project" and similar expressions of future or conditional events such as "will", "may", "should", "could" or "would".
By their nature these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not be achieved. We caution readers of this News Release not to place undue reliance on these forward-looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.
Forward-looking statements may be influenced by the following factors: the level of exploration and development activity carried on by AKITA's customers, world oil and North American natural gas prices, weather, access to capital markets and government policies. We caution that the foregoing list of important factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to AKITA, investors and others should carefully consider the foregoing factors as well as other uncertainties and events.
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