CALGARY, AB, March 4, 2022 /CNW/ -
2021 HIGHLIGHTS
- Revenue for 2021 was $995.6
million, a six percent increase from 2020 revenue of
$936.8 million.
- Revenue amounts and percentage of total by geographic
area:
-
- Canada - $249.7 million, 25 percent;
- United States - $538.9 million, 54 percent; and
- International - $207.0 million,
21 percent.
- Canadian drilling recorded 8,979 operating days in 2021, a 60
percent increase from 5,599 operating days in 2020. Canadian well
servicing recorded 36,254 operating hours in 2021, a 28 percent
increase from 28,338 operating hours in 2020.
- United States drilling
recorded 12,242 operating days in 2021, a 12 percent increase from
10,899 operating days in 2020. United
States well servicing recorded 124,916 operating hours in
2021, a 26 percent increase from the 99,016 operating hours in
2020.
- International drilling recorded 3,574 operating days in 2021, a
seven percent decrease from 3,829 operating days recorded in
2020.
- Adjusted EBITDA for 2021 was $213.2
million, a 12 percent decrease from Adjusted EBITDA of
$241.5 million for 2020.
- Funds flow from operations for 2021 decreased nine percent to
$190.7 million from $210.3 million in the year prior.
- In 2021, the Company received a $16.0
million Canada Emergency
Wage Subsidy payment from the Government of Canada.
- Net capital expenditures for the calendar year 2021 totaled
$176.0 million, During the third
quarter of 2021, the Company acquired a fleet of 35 land-based
drilling rigs located in Canada,
as well as related equipment and certain real property, for
$117.9 million. The remaining
expenditures consist of $20.5 million
in upgrade capital, $44.8 million in
maintenance capital, offset by proceeds of $7.3 million from equipment disposals. Base
capital expenditures for the calendar year 2022 are targeted to be
approximately $89.0 million, largely
related to maintenance expenditures. In addition, the Company has a
number of growth projects available to it that will result in
additional funds being spent on upgrading certain drilling rigs and
bringing other drilling rigs that are currently idle back to work.
The estimated spend on this is currently targeted at approximately
$20.0 million.
- General and administrative expense decreased 12 percent to
$38.2 million for year-ended 2021
from $43.6 million for year-ended
2020.
- Over the 2021 year, the Company repurchased US $25.7 million face value of unsecured Senior
Notes, in the open market, for cancellation and recorded a gain on
repurchase of $7.4 million (US
$5.9 million).
- On December 17, 2021, the Company
amended and extended the existing $900.0
million revolving credit facility agreement with its
syndicate of lenders. The amendments and extension provide the
Company continued access to revolver capacity and near-term
flexibility in a volatile oil price environment.
- Subsequent to December 31, 2021,
the Company completed the sale of two 3,000 HP AC drilling rigs
that were cold-stacked in Mexico
for cash proceeds of US $34.0
million. The transaction resulted in a gain of US
$23.9 million before taxes and
increased the Company's liquidity position.
OVERVIEW
Revenue for the year ended December 31,
2021 was $995.6 million, an
increase of six percent from 2020 revenue of $936.8 million. Adjusted EBITDA for 2021 totaled
$213.2 million ($1.31 per common share), 12 percent lower than
Adjusted EBITDA of $241.5 million
($1.49 per common share) for the year
ended 2020.
Net loss attributed to common shareholders for the year ended
December 31, 2021 was $159.5 million ($0.98 per common share) compared to net loss
attributed to common shareholders of $79.3
million ($0.49 per common
share) for the year ended December 31,
2020.
During the third quarter of 2021, the Company acquired a fleet
of 35 land-based drilling rigs located in Canada, as well as related equipment and
certain real property, for $117.9
million. The Company funded the purchase price with cash on
hand and available Credit Facilities.
The Company's operating days were higher in 2021, as compared to
2020, as a result of global activity improvements and the Company's
acquisition of 35 land-based drilling rigs in Canada.
During 2021, the Company received $16.0
million (2020 - $12.5 million)
from the Government of Canada's
"Canada Emergency Wage Subsidy"
("CEWS") program. The wage subsidies received partially
offset the decrease in Adjusted EBITDA and net loss attributable to
common shareholders.
The macro-economic conditions impacting the oil and natural gas
industry continued to recover over the course of the 2021 year from
the impact of the novel coronavirus ("COVID-19") pandemic,
which began in early 2020. The wide distribution of COVID-19
vaccines and subsequent rising vaccination rates globally resulted
in governments and health authorities easing travel and social
distancing restrictions, which increased global economic activity
and mobility. The increase in global mobility and economic activity
in 2021 as compared to 2020 supported, in part, the recovery of
global crude oil demand.
Furthermore, OPEC+ nations, while incrementally adding supply to
the market throughout 2021, continued to manage overall crude oil
supply. OPEC+ supply cuts, together with moderated production by
US-based oil and natural gas producers contributed to an
increasingly positive commodity price environment, with the
benchmark price of West Texas Intermediate ("WTI") trading
above US $60/bbl for the majority of
2021. Recovering demand post Covid-19 along with restricted crude
oil supply subsequently resulted in meaningful crude oil inventory
draws, further supporting commodity prices. Recent geopolitical
events, prompted by the Russian
Federation's invasion of Ukraine, have caused crude oil to increase to
above US $90/bbl.
The constructive general industry fundamentals resulted in
meaningful activity improvements in 2021 as compared to 2020, in
the Company's North American segments. However, oil and natural gas
producers in the Company's Canadian and US segments continued to be
conservative with capital allocation, preferring to prioritize
shareholder returns, which contributed to a prolonged recovery in
demand for oilfield services to approach pre-COVID-19 pandemic
levels.
In addition, the surge of the Omicron COVID-19 variant towards
the end of 2021 reinforced the ongoing conservative approach to
travel and a cautious outlook to the recovery of crude oil demand.
Over the short term, uncertainty remains regarding COVID-19
variants and virus mutation. These and other factors may impact the
future demand for and pricing of crude oil and natural gas, and as
a result the demand for oilfield services.
Working capital as of December 31,
2021 was a surplus of $104.2
million, compared to a working capital surplus of
$103.0 million as of
December 31, 2020. Working capital year-over-year was
largely unchanged due to increase in operating activity being
offset by the negative impact of foreign exchange. The Company's
available liquidity consisting of cash and available borrowings
under its $900.0 million revolving
credit facility (the "Credit Facility")
totaled $15.8 million as of December 31, 2021, compared
to $136.5 million at December 31, 2020. The available liquidity
decreased by $120.7 million primarily
due to higher borrowings on the Company's Credit Facility to fund
above-noted third quarter acquisition of 35 land-based drilling
rigs in Canada.
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 share data and operating
information)
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Revenue
|
296,166
|
|
201,265
|
|
47
|
|
995,594
|
|
936,818
|
|
6
|
Adjusted EBITDA
1
|
57,861
|
|
52,742
|
|
10
|
|
213,173
|
|
241,525
|
|
(12)
|
Adjusted EBITDA per
common share 1
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.35
|
|
$
|
0.33
|
|
6
|
|
$
|
1.31
|
|
$
|
1.49
|
|
(12)
|
Diluted
|
$
|
0.36
|
|
$
|
0.33
|
|
9
|
|
$
|
1.31
|
|
$
|
1.49
|
|
(12)
|
Net (loss) income
attributable to common shareholders
|
(29,235)
|
|
3,092
|
|
nm
|
|
(159,475)
|
|
(79,329)
|
|
nm
|
Net (loss) income
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.18)
|
|
$
|
0.02
|
|
nm
|
|
$
|
(0.98)
|
|
$
|
(0.49)
|
|
nm
|
Diluted
|
$
|
(0.18)
|
|
$
|
0.02
|
|
nm
|
|
$
|
(0.98)
|
|
$
|
(0.49)
|
|
nm
|
Cash provided by
operating activities
|
39,221
|
|
17,393
|
|
nm
|
|
178,642
|
|
246,974
|
|
(28)
|
Funds flow from
operations
|
46,644
|
|
69,630
|
|
(33)
|
|
190,695
|
|
210,265
|
|
(9)
|
Funds flow from
operations per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.28
|
|
$
|
0.44
|
|
(36)
|
|
$
|
1.17
|
|
$
|
1.30
|
|
(10)
|
Diluted
|
$
|
0.29
|
|
$
|
0.44
|
|
(34)
|
|
$
|
1.17
|
|
$
|
1.30
|
|
(10)
|
Long-term
debt
|
1,453,884
|
|
1,384,605
|
|
5
|
|
1,453,884
|
|
1,384,605
|
|
5
|
Weighted average common
shares - basic (000s)
|
162,385
|
|
162,629
|
|
—
|
|
162,541
|
|
161,667
|
|
1
|
Weighted average common
shares - diluted (000s)
|
163,453
|
|
162,721
|
|
—
|
|
163,195
|
|
161,927
|
|
1
|
Drilling
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Number of marketed rigs
2
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
127
|
|
101
|
|
26
|
|
127
|
|
101
|
|
26
|
United
States
|
93
|
|
122
|
|
(24)
|
|
93
|
|
122
|
|
(24)
|
International
4
|
42
|
|
48
|
|
(13)
|
|
42
|
|
48
|
|
(13)
|
Total
|
262
|
|
271
|
|
(3)
|
|
262
|
|
271
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days
5
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
3,229
|
|
1,434
|
|
nm
|
|
8,979
|
|
5,599
|
|
60
|
United
States
|
3,688
|
|
2,108
|
|
75
|
|
12,242
|
|
10,899
|
|
12
|
International
4
|
942
|
|
907
|
|
4
|
|
3,574
|
|
3,829
|
|
(7)
|
Total
|
7,859
|
|
4,449
|
|
77
|
|
24,795
|
|
20,327
|
|
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
|
9,821
|
|
6,955
|
|
41
|
|
36,254
|
|
28,338
|
|
28
|
United
States
|
29,419
|
|
26,764
|
|
10
|
|
124,916
|
|
99,016
|
|
26
|
Total
|
39,240
|
|
33,719
|
|
16
|
|
161,170
|
|
127,354
|
|
27
|
|
nm - calculation not
meaningful
|
1.
|
Refer to Adjusted
EBITDA calculation in Non-GAAP Measures.
|
2.
|
Total rigs: Canada -
137, United States - 127, International - 48 (2020: Canada - 118,
United States - 136, International - 53).
|
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)
|
2021
|
|
|
2020
|
|
|
2019
|
Working capital 1,
2
|
104,228
|
|
|
103,036
|
|
|
131,107
|
Cash
|
13,305
|
|
|
44,198
|
|
|
28,408
|
Long-term
debt
|
1,453,884
|
|
|
1,384,605
|
|
|
1,581,529
|
Long-term debt, net of
cash
|
1,440,579
|
|
|
1,340,407
|
|
|
1,553,121
|
Total long-term
financial liabilities
|
1,458,211
|
|
|
1,390,647
|
|
|
1,591,047
|
Total assets
|
2,977,054
|
|
|
3,054,493
|
|
|
3,470,601
|
Long-term debt to long
term-debt plus shareholder's equity ratio
|
0.55
|
|
|
0.50
|
|
|
0.52
|
|
|
1
|
See Non-GAAP Measures
section.
|
2
|
Comparative working
capital has been revised to conform with current year's
presentation
|
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
Upgrade/growth
|
3,395
|
|
—
|
|
nm
|
|
20,492
|
|
10,013
|
|
nm
|
Maintenance
|
19,518
|
|
5,032
|
|
nm
|
|
44,760
|
|
40,229
|
|
11
|
Proceeds
from disposals or property and equipment
|
(2,581)
|
|
(8,371)
|
|
(69)
|
|
(7,228)
|
|
(31,829)
|
|
(77)
|
Net capital
expenditures before acquisitions
|
20,332
|
|
(3,339)
|
|
nm
|
|
58,024
|
|
18,413
|
|
nm
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
—
|
|
—
|
|
—
|
|
117,928
|
|
—
|
|
nm
|
Net capital (proceeds)
expenditures
|
20,332
|
|
(3,339)
|
|
nm
|
|
175,952
|
|
18,413
|
|
nm
|
|
nm - calculation not
meaningful
|
REVENUE AND OILFIELD SERVICES EXPENSE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
90,243
|
|
40,885
|
|
nm
|
|
249,679
|
|
176,872
|
|
41
|
United
States
|
152,361
|
|
104,629
|
|
46
|
|
538,896
|
|
531,030
|
|
1
|
International
|
53,562
|
|
55,751
|
|
(4)
|
|
207,019
|
|
228,916
|
|
(10)
|
Total
revenue
|
296,166
|
|
201,265
|
|
47
|
|
995,594
|
|
936,818
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield services
expense
|
228,146
|
|
136,708
|
|
67
|
|
744,195
|
|
658,201
|
|
13
|
nm - calculation not meaningful
Revenue for the year ended December 31,
2021 totaled $995.6 million, a
six percent increase from the year ended December 31, 2020
revenue of $936.8 million. The
increase in total revenue during the year ended December 31, 2021 was primarily due to the global
economic recovery, improving industry fundamentals, and the
Company's acquisition of 35 land-based drilling rigs in
Canada. The increase in financial
results from the Company's global operations were offset by the
negative impact of currency translation, as the United States dollar weakened relative to
the Canadian dollar. The Company recorded revenue of $296.2
million for the three months ended December 31, 2021, a
47 percent increase from the $201.3 million recorded in the
three months ended December 31, 2020.
CANADIAN OILFIELD SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Marketed drilling
rigs1,2
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
127
|
|
101
|
|
|
|
101
|
|
101
|
|
|
Acquisition
|
—
|
|
—
|
|
|
|
35
|
|
—
|
|
|
Placed into
reserve
|
—
|
|
—
|
|
|
|
(9)
|
|
—
|
|
|
Ending
balance
|
127
|
|
101
|
|
26
|
|
127
|
|
101
|
|
26
|
Drilling operating
days3
|
3,229
|
|
1,434
|
|
nm
|
|
8,979
|
|
5,599
|
|
60
|
Drilling rig
utilization (%)1
|
22.9
|
|
13.2
|
|
73
|
|
18.5
|
|
13.0
|
|
42
|
Well servicing
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
52
|
|
52
|
|
|
|
52
|
|
52
|
|
|
Ending
balance
|
52
|
|
52
|
|
—
|
|
52
|
|
52
|
|
—
|
Well servicing
operating hours
|
9,821
|
|
6,955
|
|
41
|
|
36,254
|
|
28,338
|
|
28
|
Well servicing
utilization (%)
|
20.5
|
|
14.5
|
|
41
|
|
19.1
|
|
14.9
|
|
28
|
|
nm - calculation not
meaningful
|
1 Excludes
coring rig fleet.
|
2 Total
rigs: 137, (2020 - 118).
|
3 Defined as
contract drilling days, between spud to rig
release.
|
The Company recorded revenue of $249.7
million in Canada for the
year ended December 31, 2021, an increase of 41 percent from
$176.9 million recorded for the year
ended December 31, 2020. During the year-ended December 31, 2021, the Company recognized
$3.5 million of standby revenue and
$4.8 million of early contract
termination fees (2020 - $3.6 million
and $nil respectively). Revenue generated
in Canada increased by $49.3
million to $90.2 million for the three months
ended December 31, 2021, from $40.9 million for the
three months ended December 31, 2020. During three months
ended December 31, 2021, the Company
recognized $0.2 million of standby
revenue (2020 - $2.0
million). For the year ended December 31, 2021,
total revenue generated from the Company's Canadian operations were
25 percent of the Company's total revenue compared with 19 percent
in the prior year. In the fourth quarter of 2021, Canadian revenues
accounted for 30 percent of the total revenue compared with 20
percent in 2020.
For the year ended December 31, 2021, the Company recorded
8,979 drilling operating days in Canada, an increase of 60 percent as compared
to 5,599 drilling operating days for the year ended
December 31, 2020. During the fourth quarter of 2021 the
Company recorded 3,229 operating days in Canada, an increase of 1,795 operating days
from 1,434 operating days recorded during the fourth quarter of the
prior year. Well servicing hours increased by 28 percent to 36,254
operating hours compared with 28,338 operating hours for the year
ended December 31, 2020. Well servicing hours in the fourth
quarter of 2021 were up 41 percent to 9,821 compared to the 6,955
hours in the fourth quarter of the prior year.
The operating and financial results for the Company's Canadian
operations for 2021, were positively impacted by improved industry
fundamentals and increasing operational activity that primarily
resulted from the Company's acquisition of 35 land-based drilling
rigs during the third quarter. In addition, the Company moved nine
under-utilized drilling rigs into its Canadian operations reserve
fleet in 2021, and decommissioned 16 non-marketed drilling
rigs.
UNITED STATES OILFIELD
SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Marketed drilling
rigs1
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
93
|
|
122
|
|
|
|
122
|
|
122
|
|
|
Placed into
reserve
|
—
|
|
—
|
|
|
|
(29)
|
|
—
|
|
|
Ending
balance
|
93
|
|
122
|
|
(24)
|
|
93
|
|
122
|
|
(24)
|
Drilling operating
days2
|
3,688
|
|
2,108
|
|
75
|
|
12,242
|
|
10,899
|
|
12
|
Drilling rig
utilization (%)
|
29.4
|
|
16.6
|
|
77
|
|
24.7
|
|
21.6
|
|
14
|
Well servicing
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
48
|
|
47
|
|
|
|
47
|
|
47
|
|
|
Additions
|
—
|
|
—
|
|
|
|
1
|
|
—
|
|
|
Ending
balance
|
48
|
|
47
|
|
2
|
|
48
|
|
47
|
|
2
|
Well servicing
operating hours
|
29,419
|
|
26,764
|
|
10
|
|
124,916
|
|
99,016
|
|
26
|
Well servicing
utilization (%)
|
66.6
|
|
61.9
|
|
8
|
|
71.7
|
|
57.6
|
|
24
|
|
1Total rigs:
127, (2020 - 136).
|
2 Defined as
contract drilling days, between spud to rig
release.
|
For the year ended December 31, 2021, revenue of
$538.9 million was recorded in
the United States, an increase of
one percent from the $531.0 million
recorded in the prior year. Revenues recorded in the United States were $152.4 million in the fourth quarter of 2021, a
46 percent increase from the $104.6
million recorded in the corresponding period of the prior
year. The Company's United States
operations accounted for 54 percent of the Company's total revenue
in the 2021 fiscal year (2020 - 57 percent) and was the largest
contributor to the Company's total revenue in 2021, consistent with
the prior year. In the United
States, the Company recognized US $9.9 million of standby revenue and US
$4.5 million of early contract
termination fees in 2021 (2020 - US $10.0
million and US $23.2 million
respectively). During the fourth quarter of 2021,
United States operations accounted
for 51 percent of the Company's revenue (2020 - 52 percent), also
the largest contributor to the Company's consolidated fourth
quarter revenues and consistent with the prior year.
In the United States, drilling
operating days increased by 12 percent from 10,899 drilling
operating days in 2020 to 12,242 operating days in 2021. For the
year ended December 31, 2021, well servicing activity
increased 26 percent to 124,916 operating hours, from 99,016
operating hours in 2020. During the fourth quarter drilling
operating days increased by 75 percent from 2,108 operating days in
2020 to 3,688 operating days in 2021. For the fourth quarter ended
December 31, 2021, well servicing activity increased 10
percent from 26,764 operating hours in 2020 to 29,419 operating
hours.
Overall operating and financial results for the Company's
United States operations reflect a
slow recovery from the negative impacts of the COVID-19 pandemic,
as the Company's customers in the United
States segment were conservative regarding capital
allocation in 2021. Over the course of 2021, the Company's
United States operations continued
to see quarter-over-quarter increases in activity due to the
economic recovery, following what appears to have been a peak in
severity of the COVID-19 pandemic. The financial results from the
Company's United States operations
were negatively impacted on currency translation, as the United States dollar weakened relative to
the Canadian dollar in 2021.
During 2021, the Company acquired one well servicing rig, moved
29 under-utilized drilling rigs into its United States reserve fleet, and
decommissioned nine non-marketed drilling rigs.
INTERNATIONAL OILFIELD SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Marketed drilling and
workover rigs1
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
42
|
|
48
|
|
|
|
48
|
|
43
|
|
|
Acquisition of TDI
joint venture
|
—
|
|
—
|
|
|
|
—
|
|
5
|
|
|
Placed into
reserve
|
—
|
|
—
|
|
|
|
(6)
|
|
—
|
|
|
Ending
balance
|
42
|
|
48
|
|
(13)
|
|
42
|
|
48
|
|
(13)
|
Drilling operating
days2
|
942
|
|
907
|
|
4
|
|
3,574
|
|
3,829
|
|
(7)
|
Drilling rig
utilization (%)
|
20.1
|
|
19.3
|
|
4
|
|
19.3
|
|
21.2
|
|
(9)
|
|
1 Total
rigs: 48, (2020 - 53).
|
2 Defined as contract drilling days,
between spud to rig release.
|
The Company's international revenues for the year ended
December 31, 2021 decreased 10 percent to $207.0 million from $228.9
million recorded in the year ended December 31, 2020.
International revenue totaled $53.6
million in the fourth quarter of 2021, a four percent
decrease from $55.8 million recorded
in the corresponding period of the prior year. The Company's
international operations accounted for 21 percent of the Company's
total revenue in 2021 (2020 - 24 percent). The Company's
international operations recognized US $0.6
million of standby revenue in 2021 (2020 - US $7.8 million). The Company's international
operations contributed 18 percent of the Company's fourth quarter
revenue in 2021 (2020 - 28 percent).
International drilling operating days totaled 3,574 in 2021
compared to 3,829 drilling operating days for the prior year, a
decrease of seven percent. International operating days for the
three months ended December 31, 2021 increased four percent to
942 compared to 907 operating days in the fourth quarter of
2020.
As was the case in the Company's United States operations, operating and
financial results from the international operations reflect a slow
recovery from the negative impacts of the COVID-19 pandemic, in
particular due to COVID-19-related disruptions delaying planned new
drilling programs. The financial results from the Company's
international operations were further negatively impacted on
currency translation, as the United
States dollar weakened relative to the Canadian dollar in
2021.
During 2021, the Company sold one rig from its discontinued
operations in Kurdistan, moved six
under-utilized drilling rigs into its international reserve fleet
and decommissioned four non-marketed drilling rigs.
DEPRECIATION
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Depreciation
|
74,194
|
|
96,338
|
|
(23)
|
|
288,188
|
|
374,705
|
|
(23)
|
Depreciation expense for the year decreased by 23 percent to
$288.2 million compared with
$374.7 million for the year ended
2020. Depreciation expense totaled $74.2
million for the fourth quarter of 2021 compared with
$96.3 million for the fourth quarter
of 2020, a decrease of 23 percent. The decrease in depreciation is
primarily due to certain operating assets having become fully
depreciated, after which no further depreciation expense is
incurred on such assets. Furthermore, the positive translational
impact of United States
dollar-denominated assets also decreased the depreciation expense.
Offsetting the overall decrease was the depreciation incurred on
the additional 35 drilling rigs acquired in Canada during the third quarter of
2021.
GENERAL AND ADMINISTRATIVE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
General and
administrative
|
10,159
|
|
11,815
|
|
(14)
|
|
38,226
|
|
43,567
|
|
(12)
|
% of revenue
|
3.4
|
|
5.9
|
|
|
|
3.8
|
|
4.7
|
|
|
For the year ended December 31, 2021, general and
administrative expense totaled $38.2
million (3.8 percent of revenue) compared to $43.6 million (4.7 percent of revenue) for the
year ended December 31, 2020, a
decrease of 12 percent. General and administrative expense
decreased 14 percent to $10.2 million
(3.4 percent of revenue) for the fourth quarter of 2021. General
and administrative expense decreased as a result of cost saving
initiatives implemented in response to the COVID-19 pandemic,
including organizational restructuring, and the CEWS wage subsidy
received from the Government of Canada.
RESTRUCTURING
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Restructuring
|
350
|
|
4,448
|
|
nm
|
|
4,580
|
|
16,042
|
|
(71)
|
|
nm - calculation not
meaningful
|
For the year ended December 31,
2021, restructuring expense totaled $4.6 million (2020 - $16.0
million). Restructuring expense consists of costs relating
to the organizational restructuring of the Company due to the
significant decline in activity as a result of the COVID-19
pandemic.
FOREIGN EXCHANGE AND OTHER (GAIN) LOSS
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Foreign exchange and
other (gain) loss
|
(208)
|
|
(8,788)
|
|
(98)
|
|
11,102
|
|
(5,726)
|
|
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
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Gain on repurchase of
unsecured Senior Notes
|
—
|
|
(59,260)
|
|
nm
|
|
(7,431)
|
|
(162,849)
|
|
(95)
|
|
nm - calculation not
meaningful
|
For the year ended December 31,
2021, the Company repurchased for cancellation US
$25.7 million (2020 - US $198.7 million) face value of unsecured Senior
Notes (the "Senior Notes"), in the open market, and recorded
a gain on repurchase of $7.4 million
(US $5.9 million) (2020 - US 120.9
million).
INTEREST EXPENSE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Interest
expense
|
25,027
|
|
24,236
|
|
3
|
|
97,596
|
|
107,374
|
|
(9)
|
Interest expenses were incurred on the Company's Credit
Facility, the United States dollar
denominated Senior Notes, $37.0
million of subordinate convertible debentures (the
"Convertible Debentures"), a mortgage (the
"Mortgage") and capital lease obligations. Included within
interest expense for 2021 is $0.5
million of accrued interest relating to the Senior Notes,
paid in cash as part of the repurchase in 2021 of US $25.7 million in face value of the Senior Notes
(2020 - $5.2 million), as described
above.
Interest expense decreased by $9.8
million for the year ended December
31, 2021 compared to the same period in 2020. The decrease
is the result of a lower effective interest rate. The positive
translational impact on US dollar-denominated debt further
decreased interest expense for the year ended December 31, 2021. For the three months ended
December 31, 2021, interest expense
increased three percent to $25.0
million compared to the comparative period in 2020 as a
result of the higher outstanding debt balance held in the second
half of 2021.
INCOME TAXES (RECOVERY)
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Current income
tax
|
296
|
|
51
|
|
nm
|
|
989
|
|
1,140
|
|
(13)
|
Deferred income tax
(recovery)
|
(11,693)
|
|
(34,061)
|
|
(66)
|
|
(39,443)
|
|
(54,928)
|
|
(28)
|
Total income tax
(recovery)
|
(11,397)
|
|
(34,010)
|
|
(66)
|
|
(38,454)
|
|
(53,788)
|
|
(29)
|
Effective income tax
rate (%)
|
28.1
|
|
9.6
|
|
|
|
19.8
|
|
44.6
|
|
|
|
nm - calculation not
meaningful
|
The effective income tax rate for the year ended
December 31, 2021 was 19.8 percent compared with
44.6 percent for the year ended December 31, 2020.
The effective tax rate was impacted by earnings in foreign
jurisdictions.
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL
($ thousands, except
per share amounts)
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Cash provided by
operating activities
|
39,221
|
|
17,393
|
|
nm
|
|
178,642
|
|
246,974
|
|
(28)
|
Funds flow from
operations
|
46,644
|
|
69,630
|
|
(33)
|
|
190,695
|
|
210,265
|
|
(9)
|
Funds flow from
operations per common share
|
$
|
0.28
|
|
$
|
0.44
|
|
(36)
|
|
$
|
1.17
|
|
$
|
1.30
|
|
(10)
|
Working capital
1
|
104,228
|
|
103,036
|
|
1
|
|
104,228
|
|
103,036
|
|
1
|
|
nm - calculation not
meaningful
|
1
Comparative working capital has been revised to conform with
current year's presentation
|
For the year ended December 31, 2021, the Company generated
funds flow from operations of $190.7
million ($1.17 per common
share) a decrease of nine percent from $210.3 million ($1.30 per common share) for the year ended
December 31, 2020. The Company generated funds flow from
operations of $46.6 million
($0.28 per common share) in the three
months ended December 31, 2021, compared to $69.6 million ($0.44 per common share) for the three months
ended December 31, 2020. The decrease in funds flow from
operations in 2021 compared to 2020 is primarily due to the decline
in standby and early termination fee revenues.
As of December 31, 2021, the Company's working capital
was a surplus of $104.2 million,
compared to a working capital surplus of $103.0 million as of December 31, 2020.
Working capital remained largely consistent with the prior year as
the increase in operating activity was offset by the negative
impact of the foreign exchange. The Company's Credit Facility
provides for total borrowings of $900.0
million of which $2.5
million was undrawn and available at December 31,
2021.
INVESTING ACTIVITIES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
—
|
|
—
|
|
—
|
|
(117,928)
|
|
—
|
|
nm
|
Purchase of property
and equipment
|
(22,913)
|
|
(5,032)
|
|
nm
|
|
(65,252)
|
|
(50,242)
|
|
30
|
Proceeds from disposals
of property and equipment
|
2,581
|
|
8,371
|
|
(69)
|
|
7,228
|
|
31,829
|
|
(77)
|
Acquisition of joint
venture and minority interest, net of cash
|
—
|
|
—
|
|
—
|
|
—
|
|
(31,885)
|
|
nm
|
Net change in non-cash
working capital
|
(755)
|
|
(524)
|
|
44
|
|
1,366
|
|
59
|
|
nm
|
Cash (used in) provided
by investing activities
|
(21,087)
|
|
2,815
|
|
nm
|
|
(174,586)
|
|
(50,239)
|
|
nm
|
|
nm - calculation not
meaningful
|
Net purchases of property and equipment during the fiscal year
ending 2021 totaled $176.0 million
(2020 - $18.4 million) and net
purchases of property and equipment totaled $20.3 million for the fourth quarter (2020 - net
proceeds of $3.3 million). During the
third quarter of 2021, the Company acquired a fleet of 35
land-based drilling rigs located in Canada, as well as related equipment and
certain real property, for $117.9
million. The remaining purchase of property and equipment
relates primarily to $44.8
million in maintenance capital and $20.5 million in upgrade capital (2020 -
$40.2 million and $10.0 million respectively).
FINANCING ACTIVITIES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
2020
|
|
% change
|
|
2021
|
|
2020
|
|
% change
|
Proceeds from long-term
debt
|
13,143
|
|
12,951
|
|
1
|
|
162,269
|
|
121,520
|
|
34
|
Repayments of long-term
debt
|
(4,789)
|
|
(15,732)
|
|
(70)
|
|
(89,532)
|
|
(164,518)
|
|
(46)
|
Lease obligation
principal repayments
|
(1,713)
|
|
(1,812)
|
|
(5)
|
|
(6,845)
|
|
(9,216)
|
|
(26)
|
Interest
paid
|
(38,594)
|
|
(32,452)
|
|
19
|
|
(99,751)
|
|
(107,956)
|
|
(8)
|
Purchase of common
shares held in trust
|
(379)
|
|
(244)
|
|
55
|
|
(1,173)
|
|
(969)
|
|
21
|
Cash
dividends
|
—
|
|
—
|
|
—
|
|
—
|
|
(19,574)
|
|
nm
|
Cash used in financing
activities
|
(32,332)
|
|
(37,289)
|
|
(13)
|
|
(35,032)
|
|
(180,713)
|
|
(81)
|
|
nm - calculation not
meaningful
|
As at December 31, 2021, the
amount of available borrowings under the Credit Facility was
$2.5 million. In addition, the
Company has available a US $50.0
million secured letter of credit facility, of which US
$8.0 million was available as of
December 31, 2021.
On December 17, 2021, the Company
amended and restated its existing credit agreement with its
syndicate lenders, which provides a revolving Credit Facility of
$900.0 million. The amendments
include an extension to the maturity date of the Credit Facility to
the earlier of: (i) six months prior to maturity date of the Senior
Notes due April 15, 2024, and (ii)
November 25, 2024. No principal
payments are due until then. The amended and restated Credit
Facility provides the Company with continued access to revolver
capacity in a dynamic industry environment.
On March 18, 2021, the Company
amended the terms of the Convertible Debentures to:
i.
|
extend the maturity
date from January 31, 2022 to May 1, 2023,
|
ii.
|
increase the interest
rate from 7.00% to 7.75% per annum payable semi-annually in
arrears, and
|
iii.
|
reduce the per share
conversion price from $7.00 to $1.75.
|
During the second quarter of 2019, the Company issued US
$700.0 million of Senior Notes due
2024 bearing interest at 9.25% per annum. The net proceeds of the
Senior Notes offering and cash on hand were used to repay all
outstanding amounts under the Company's US $700.0 million senior loan facility and terminate
that facility. The Senior Notes may be redeemed by the Company, in
whole or in part, at any time on or after April 15, 2021 at a redemption price of 104.625%
of the principal amount, after April 15,
2022 at a redemption price of 102.313% of the principal
amount; and after April 15, 2023 at
100% of the principal amount, in all cases plus accrued interest up
to but excluding the redemption rate.
The current capital structure of the Company 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.
The Company generally may, at any time and from time to
time acquire Senior Notes for cancellation by means of open
market purchases or negotiated transactions. However, applicable
covenants in the Credit Facility limit the Company's ability to
make further repurchases of the Senior Notes to $25.0 million, except that additional Senior
Notes may be repurchased for redemption in excess of the
$25.0 million limit if certain
criteria are met. During the year ended December 31, 2021, the Company purchased US
$25.7 million of face value Senior
Notes in the open market for cancellation, for US $19.8 million.
On December 15, 2021, the Company
secured a $10.0 million mortgage. The
Mortgage is secured with various real properties. Interest rate
varies from 10.00% to 14.00% over the course of the term of
Mortgage. The Mortgage maturity date is six months following the
Credit Facility maturity date, with the Company option of early
redemption.
Covenants
The following is a list of the Company's currently applicable
covenants pursuant to the Credit Facility and the covenant
calculations as at December 31,
2021:
|
Covenant
|
|
|
December 31,
2021
|
The Credit
Facility
|
|
|
|
|
Consolidated
EBITDA1
|
> $140.0
million
|
|
|
$
|
232,649
|
Consolidated EBITDA to
Consolidated Interest Expense1,2
|
≥ 1.75
|
|
|
2.47
|
Consolidated Senior
Debt to Consolidated EBITDA1,3
|
≤ 4.00
|
|
|
3.80
|
|
1 Please refer to "Non-GAAP Measures"
and "Overview and Select Annual Information" sections 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 December 31, 2021 the
Company was in compliance with all covenants related to the Credit
Facility.
The Credit Facility
The amended and restated credit agreement, a copy of which is
available on SEDAR, provides the Company with its Credit Facility
and includes requirements that the Company comply with certain
covenants including a minimum Consolidated EBITDA requirement, a
Consolidated EBITDA to Consolidated Interest Expense ratio and a
Consolidated Senior Debt to Consolidated EBITDA ratio.
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 and restatement of the credit agreement,
dated December 17, 2021, permitted
encumbrances are limited to $25.0
million.
Senior Notes
The note indenture governing the Senior Notes, a copy of which
is available on SEDAR, contains certain restrictions and
limitations on the Company's ability to pay dividends; purchase and
redeem shares and subordinated debt of the Company; and make
certain restricted investments. These restrictions and limitations
are tempered by the existence of a number of exceptions to the
general prohibitions, including baskets allowing for restricted
payments.
The note indenture also restricts the Company's 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 at December 31, 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 additional indebtedness, including the incurrence
of additional 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 four percent of the
Company's consolidated tangible assets.
NEW BUILDS AND MAJOR RETROFITS
During the year-ended December 31,
2021, the Company:
- acquired a fleet of 35 land-based drilling rigs as well as
related equipment and certain real property located in Canada for $117.9
million;
- added one well servicing rig to the
United States fleet;
- sold one drilling rig from its discontinued operation in
Kurdistan;
- moved nine, 29, and six under-utilized drilling rigs to its
Canadian, United States, and
international reserve fleets respectively, and;
- decommissioned 16, nine, and four rigs from its non-marketed
Canadian, United States and
international fleets.
The Company is currently directing capital expenditures
primarily to maintenance capital items and selective upgrades.
OUTLOOK
Industry Overview
The outlook for oilfield services continues to be rather
constructive, as the crude oil and natural gas industry continues
its recovery from the adverse impact of the COVID-19 pandemic.
Despite the surge of the Omicron COVID-19 variant at the end of
2021 and early in 2022, vaccination rates globally have aided
economic growth and mobility, which has continued to support the
recovery of crude oil demand to pre-COVID-19 pandemic levels.
Furthermore, the crude oil market has continued to absorb
increased supply from OPEC+ nations as they continue to reduce
supply cuts, as well as increased production from North American
producers. Strengthening oil demand coupled with moderated oil
supply resulted in strong global commodity prices over the fourth
quarter of 2021 and into the first quarter of 2022, with the
benchmark price of West Texas Intermediate ("WTI") averaging
a low of US $77/bbl in the fourth
quarter of 2021 to an average high of US $92/bbl in February
2022. The recent invasion of Ukraine by the Russian Federation has placed upward pressure
on crude oil prices.
We expect global economic growth to continue in 2022, albeit at
a slower pace in comparison to 2021, as COVID-19 related fiscal
stimulus continues to dissipate and inflationary concerns prompt a
tightening of monetary policy. However, despite a slower pace in
economic growth, we expect oil demand to continue to recover to
pre-pandemic levels, and tight crude oil supply under a sustained
commodity price environment are expected to drive oilfield services
activity improvements in 2022. We continue to expect oil and
natural gas producers to remain committed to prioritizing
shareholder returns and moderate production growth with steady
activity increases. Higher industry utilization is further expected
to drive day-rate pricing improvements year-over-year in the
Company's North American segments.
Moreover, short-term uncertainty remains regarding the
macroeconomic conditions, including commodity price fluctuations,
potential setbacks in COVID-19 vaccine efficacy, demand for
hydrocarbons, and OPEC+ production and supply decisions that may
impact the short-term demand for oilfield services. The invasion of
Ukraine by the Russian Federation also may impact future
crude oil prices.
The Company remains committed to strategic capital allocation
and debt retirement. The Company has budgeted base capital
expenditures for 2022 of approximately $89.0
million, largely related to maintenance expenditures. In
addition, the Company has a number of growth projects available to
it that will result in additional funds being spent on upgrading
certain drilling rigs and bringing other drilling rigs that are
currently idle back to work. The estimated spend on this is
currently targeted at approximately $20.0
million. As at January 1,
2022, the Company moved four, five, and eight under-utilized
drilling rigs to its Canadian, United
States, and international reserve fleets respectively.
Canadian Activity
Canadian activity, representing 25 percent of total revenue in
2021, improved over the fourth quarter of 2021 and into the first
quarter of 2022 due to improved industry conditions over the winter
drilling season and the Company's acquisition of 35 land-based
drilling rigs in July 2021. We expect
activity to decline exiting the first quarter of 2022, as
operations enter seasonal spring break-up in the second quarter of
2022.
As of March 3, 2022, of 123
marketed Canadian drilling rigs, approximately 42 percent are
engaged under term contracts of various durations. Approximately 27
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 54 percent of total revenue in 2021, improved over the
fourth quarter of 2021 and into the first quarter of 2022 due to
improved industry conditions. We currently expect the United States activity to remain positive
and to continue to steadily improve in the second quarter of
2022.
As of March 3, 2022, of 88
marketed United States drilling
rigs, approximately 55 percent are engaged under term contracts of
various durations. Approximately 25 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 21 percent of total revenue
in 2021, remained steady over the fourth quarter of 2021 and into
the first quarter of 2022. Operations in Argentina are expected to improve in 2022,
with two drilling rigs currently active. In the Middle East, operations in Bahrain (two rigs) and Kuwait (two rigs) are expected to remain
steady. Operations in Australia,
which currently has seven active drilling rigs, are expected to
remain steady or to modestly improve over 2022.
As of March 3, 2022, of 34
marketed international drilling rigs, approximately 41 percent are
engaged under term contracts of various durations. Approximately 50
percent of our contracted rigs have a remaining term of six months
or longer, although they may be subject to early
termination.
RISKS 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, economic and market conditions, crude oil and natural
gas prices, political events including the recent invasion of
Ukraine by the Russian Federation, foreign currency
fluctuations, weather conditions, the Company's defense of lawsuits
and other claims, and the ability of oil and 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 fourth
quarter 2021 results at 10:00 a.m.
MST (12:00 p.m. EST) on
Friday, March 4, 2022. 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 March 11, 2022 by
dialing 1-416-764-8677 (in Toronto) or 1-888-390-0541 (outside
Toronto) and entering the
reservation number 207260. A live broadcast may be accessed through
the Company's web site 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
|
|
December 31
2021
|
|
December 31
2020
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
|
$
|
13,305
|
|
$
|
44,198
|
Accounts
receivable
|
|
226,807
|
|
164,395
|
Inventories, prepaid
and other
|
|
49,172
|
|
52,679
|
Income taxes
receivable
|
|
580
|
|
290
|
Total current
assets
|
|
289,864
|
|
261,562
|
|
|
|
|
|
Property and
equipment
|
|
2,512,953
|
|
2,649,702
|
Deferred income
taxes
|
|
174,237
|
|
143,229
|
Total assets
|
|
$
|
2,977,054
|
|
$
|
3,054,493
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
accruals
|
|
$
|
177,932
|
|
$
|
146,011
|
Share-based
compensation
|
|
1,055
|
|
251
|
Income taxes
payable
|
|
1,389
|
|
4,005
|
Current portion of
lease obligations
|
|
5,260
|
|
8,259
|
Total current
liabilities
|
|
185,636
|
|
158,526
|
|
|
|
|
|
Lease
obligations
|
|
4,327
|
|
6,042
|
Long-term
debt
|
|
1,453,884
|
|
1,384,605
|
Share-based
compensation
|
|
7,966
|
|
2,743
|
Income taxes
payable
|
|
7,647
|
|
4,424
|
Deferred income
taxes
|
|
120,100
|
|
128,276
|
Non-controlling
interest
|
|
4,832
|
|
4,853
|
Total
liabilities
|
|
1,784,392
|
|
1,689,469
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Shareholder's
capital
|
|
230,376
|
|
230,354
|
Contributed
surplus
|
|
23,197
|
|
23,324
|
Equity component of
subordinate convertible debenture
|
|
2,380
|
|
3,193
|
Accumulated other
comprehensive income
|
|
223,308
|
|
235,277
|
Retained
earnings
|
|
713,401
|
|
872,876
|
Total shareholders'
equity
|
|
1,192,662
|
|
1,365,024
|
Total liabilities and
shareholders' equity
|
|
$
|
2,977,054
|
|
$
|
3,054,493
|
Ensign Energy Services Inc.
Consolidated
Statements of (Loss) Income
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
December 31
2021
|
|
December 31
2020
|
|
December 31
2021
|
|
December 31
2020
|
(Unaudited - in
thousands of Canadian dollars, except per share
data)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
296,166
|
|
$
|
201,265
|
|
$
|
995,594
|
|
$
|
936,818
|
Expenses
|
|
|
|
|
|
|
|
|
Oilfield
services
|
|
228,146
|
|
136,708
|
|
744,195
|
|
658,201
|
Depreciation
|
|
74,194
|
|
96,338
|
|
288,188
|
|
374,705
|
General and
administrative
|
|
10,159
|
|
11,815
|
|
38,226
|
|
43,567
|
Impairment
|
|
—
|
|
11,480
|
|
—
|
|
11,480
|
Restructuring
|
|
350
|
|
4,448
|
|
4,580
|
|
16,042
|
Share-based
compensation
|
|
(5)
|
|
772
|
|
6,377
|
|
(2,121)
|
Foreign exchange and
other (gain) loss
|
|
(208)
|
|
(8,788)
|
|
11,102
|
|
(5,726)
|
Total
expenses
|
|
312,636
|
|
252,773
|
|
1,092,668
|
|
1,096,148
|
Loss before interest
expense, accretion of deferred financing charges, other losses
(gains) and income taxes
|
|
(16,470)
|
|
(51,508)
|
|
(97,074)
|
|
(159,330)
|
Loss from investment in
joint ventures
|
|
—
|
|
—
|
|
—
|
|
1,349
|
(Gain) loss on asset
sale
|
|
(3,596)
|
|
—
|
|
(3,596)
|
|
3,437
|
Gain on repurchase of
unsecured Senior Notes
|
|
—
|
|
(59,260)
|
|
(7,431)
|
|
(162,849)
|
Interest
expense
|
|
25,027
|
|
24,236
|
|
97,596
|
|
107,374
|
Accretion of deferred
financing charges
|
|
2,710
|
|
2,972
|
|
10,819
|
|
11,887
|
Loss before income
taxes
|
|
(40,611)
|
|
(19,456)
|
|
(194,462)
|
|
(120,528)
|
Income tax
(recovery)
|
|
|
|
|
|
|
|
|
Current income
tax
|
|
296
|
|
51
|
|
989
|
|
1,140
|
Deferred income tax
(recovery)
|
|
(11,693)
|
|
(34,061)
|
|
(39,443)
|
|
(54,928)
|
Total income tax
(recovery)
|
|
(11,397)
|
|
(34,010)
|
|
(38,454)
|
|
(53,788)
|
Net (loss) Income
from continued operations
|
|
(29,214)
|
|
14,554
|
|
(156,008)
|
|
(66,740)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations
|
|
(30)
|
|
(11,472)
|
|
(3,452)
|
|
(12,799)
|
Net (loss)
income
|
|
(29,244)
|
|
3,082
|
|
(159,460)
|
|
(79,539)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to:
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
(29,235)
|
|
3,092
|
|
(159,475)
|
|
(79,329)
|
Non-controlling
interests
|
|
(9)
|
|
(10)
|
|
15
|
|
(210)
|
|
|
$
|
(29,244)
|
|
$
|
3,082
|
|
$
|
(159,460)
|
|
$
|
(79,539)
|
|
|
|
|
|
|
|
|
|
Net (loss) income
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.18)
|
|
$
|
0.02
|
|
$
|
(0.98)
|
|
$
|
(0.49)
|
Diluted
|
|
$
|
(0.18)
|
|
$
|
0.02
|
|
$
|
(0.98)
|
|
$
|
(0.49)
|
Ensign Energy Services Inc.
Consolidated
Statements of Cash Flows
|
|
Three months
ended
|
|
Twelve months
ended
|
(Unaudited - in
thousands of Canadian dollars)
|
|
December 31
2021
|
|
December 31
2020
|
|
December 31
2021
|
|
December 31
2020
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(29,244)
|
|
$
|
3,082
|
|
$
|
(159,460)
|
|
$
|
(79,539)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation
|
|
74,194
|
|
96,338
|
|
288,188
|
|
374,705
|
Loss from discontinued
operations, net of cash
|
|
—
|
|
9,468
|
|
—
|
|
9,468
|
Impairment
|
|
—
|
|
11,480
|
|
—
|
|
11,480
|
Share-based
compensation
|
|
(5)
|
|
772
|
|
6,377
|
|
(2,121)
|
Loss from investment in
joint ventures
|
|
—
|
|
—
|
|
—
|
|
1,349
|
Loss in asset
sale
|
|
(3,596)
|
|
—
|
|
(3,596)
|
|
3,437
|
Gain on repurchase of
unsecured Senior Notes
|
|
—
|
|
(59,260)
|
|
(7,431)
|
|
(162,849)
|
Unrealized foreign
exchange and other (gain) loss
|
|
(10,749)
|
|
14,603
|
|
(2,355)
|
|
(9,998)
|
Accretion on deferred
financing charges
|
|
2,710
|
|
2,972
|
|
10,819
|
|
11,887
|
Interest
expense
|
|
25,027
|
|
24,236
|
|
97,596
|
|
107,374
|
Deferred income tax
recovery
|
|
(11,693)
|
|
(34,061)
|
|
(39,443)
|
|
(54,928)
|
Funds flow from
operations
|
|
46,644
|
|
69,630
|
|
190,695
|
|
210,265
|
Net change in non-cash
working capital
|
|
(7,423)
|
|
(52,237)
|
|
(12,053)
|
|
36,709
|
Cash provided by
operating activities
|
|
39,221
|
|
17,393
|
|
178,642
|
|
246,974
|
Investing
activities
|
|
|
|
|
|
|
|
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
|
—
|
|
—
|
|
(117,928)
|
|
—
|
Purchase of property
and equipment
|
|
(22,913)
|
|
(5,032)
|
|
(65,252)
|
|
(50,242)
|
Proceeds from disposals
of property and equipment
|
|
2,581
|
|
8,371
|
|
7,228
|
|
31,829
|
Acquisition of joint
venture, net of cash
|
|
—
|
|
—
|
|
—
|
|
(31,885)
|
Net change in non-cash
working capital
|
|
(755)
|
|
(524)
|
|
1,366
|
|
59
|
Cash (used in)
provided by investing activities
|
|
(21,087)
|
|
2,815
|
|
(174,586)
|
|
(50,239)
|
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from long-term
debt
|
|
13,143
|
|
12,951
|
|
162,269
|
|
121,520
|
Repayments of long-term
debt
|
|
(4,789)
|
|
(15,732)
|
|
(89,532)
|
|
(164,518)
|
Lease obligation
principal repayments
|
|
(1,713)
|
|
(1,812)
|
|
(6,845)
|
|
(9,216)
|
Interest
paid
|
|
(38,594)
|
|
(32,452)
|
|
(99,751)
|
|
(107,956)
|
Purchase of common
shares held in trust
|
|
(379)
|
|
(244)
|
|
(1,173)
|
|
(969)
|
Cash
dividends
|
|
—
|
|
—
|
|
—
|
|
(19,574)
|
Cash used in
financing activities
|
|
(32,332)
|
|
(37,289)
|
|
(35,032)
|
|
(180,713)
|
Net (decrease)
increase in cash
|
|
(14,198)
|
|
(17,081)
|
|
(30,976)
|
|
16,022
|
Effects of foreign
exchange on cash
|
|
3,177
|
|
4,306
|
|
83
|
|
(232)
|
Cash – beginning of
period
|
|
24,326
|
|
56,973
|
|
44,198
|
|
28,408
|
Cash – end of
period
|
|
$
|
13,305
|
|
$
|
44,198
|
|
$
|
13,305
|
|
$
|
44,198
|
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 principal
business activities prior to how these activities are financed, how
assets are depreciated, amortized, and impaired 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 expenses, 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 servicing business. Adjusted EBITDA is not
intended to represent net loss as calculated in accordance with
IFRS.
Adjusted EBITDA
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2021
|
|
|
2020
|
|
2021
|
|
|
2020
|
Loss before income
taxes
|
(40,611)
|
|
|
(19,456)
|
|
(194,462)
|
|
|
(120,528)
|
Add-back/(deduct)
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
25,027
|
|
|
24,236
|
|
97,596
|
|
|
107,374
|
Accretion of deferred
financing charges
|
2,710
|
|
|
2,972
|
|
10,819
|
|
|
11,887
|
Depreciation
|
74,194
|
|
|
96,338
|
|
288,188
|
|
|
374,705
|
Impairment
|
—
|
|
|
11,480
|
|
—
|
|
|
11,480
|
Share-based
compensation
|
(5)
|
|
|
772
|
|
6,377
|
|
|
(2,121)
|
(Gain) loss on asset
sale
|
(3,596)
|
|
|
—
|
|
(3,596)
|
|
|
3,437
|
Gain on repurchase of
unsecured Senior Notes
|
—
|
|
|
(59,260)
|
|
(7,431)
|
|
|
(162,849)
|
Foreign exchange and
other (gain) loss
|
(208)
|
|
|
(8,788)
|
|
11,102
|
|
|
(5,726)
|
Loss from investments
in joint ventures
|
—
|
|
|
—
|
|
—
|
|
|
1,349
|
Restructuring
|
350
|
|
|
4,448
|
|
4,580
|
|
|
16,042
|
Adjusted EBITDA from
investments in joint ventures
|
—
|
|
|
—
|
|
—
|
|
|
6.475
|
Adjusted
EBITDA
|
57,861
|
|
|
52,742
|
|
213,173
|
|
|
241,525
|
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.
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 2022, 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 to modify their drilling budgets; the
status of current negotiations with the Company's customers and
vendors; customer focus on safety performance; existing term
contracts that may not be renewed or are terminated prematurely;
the Company's ability to provide services on a timely basis;
successful integration of acquisitions; the general stability of
the economic and political environments in the jurisdictions where
we operate, and geopolitical events such as the recent invasion of
Ukraine by the Russian Federation.
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 Organization
of Petroleum Exporting Countries ("OPEC") and other
countries (OPEC and various other countries are referred to as
"OPEC +") 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 "Risks and
Uncertainties" section of the Management Discussion & Analysis
and the "Risk Factors" section of the Company's Annual Information
Form. Readers are cautioned that the lists of important factors
contained herein are not exhaustive. Unpredictable or unknown
factors not discussed in this document could also have material
adverse effects on forward-looking statements.
The forward-looking statements contained in this document 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.