CALGARY,
AB, November 4, 2022 /CNW/ -
THIRD QUARTER HIGHLIGHTS
- Revenue for the third quarter of 2022 was $432.6 million, a 61 percent increase from the
third quarter of 2021 revenue of $268.6
million.
- Revenue by geographic area:
-
- Canada - $123.4 million, 29 percent of total;
- United States - $247.4 million, 57 percent of total; and
- International - $61.8 million, 14
percent of total.
- Canadian drilling recorded 4,009 operating days in the third
quarter of 2022, a 41 percent increase from 2,846 operating days in
the third quarter of 2021. Canadian well servicing recorded 12,857
operating hours in the third quarter of 2022, a 38 percent increase
from 9,316 operating hours in the third quarter of 2021.
- United States drilling
recorded 4,937 operating days in the third quarter of 2022, a 61
percent increase from 3,074 operating days in the third quarter of
2021. United States well servicing
recorded 32,877 operating hours in the third quarter of 2022, a one
percent increase from 32,452 operating hours in the third quarter
of 2021.
- International drilling recorded 996 operating days in the third
quarter of 2022, a seven percent increase from 929 operating days
recorded in the third quarter of 2021.
- Adjusted EBITDA for the third quarter of 2022 was $105.4 million, a 76 percent increase from
Adjusted EBITDA of $59.8 million for
the third quarter of 2021.
- Funds flow from operations for the third quarter of 2022
increased 84 percent to $103.3
million from $56.2 million in
the third quarter of the prior year.
- During the third quarter of 2022, the Company did not record
any Canada Emergency Wage Subsidy
program payments as compared with $5.3
million recognized in the third quarter of 2021.
- General and administrative expense on a per operating day basis
decreased by eight percent and totaled $12.8
million (2.9 percent of revenue) in the third quarter of
2022, compared with $10.0 million
(3.7 percent of revenue) in the third quarter of 2021.
- Net capital purchases for the third quarter of 2022 were
$46.9 million, consisting of
$18.4 million in upgrade capital and
$28.5 million in maintenance
capital.
- Capital expenditures for the 2022 year are targeted to be
approximately $165.0 million of which
$60.0 million relates to upgrade and
growth capital. Within the upgrade and growth capital, two drilling
rigs will be reactivated in Oman
in the fourth quarter of 2022, as well as a third in the first half
of 2023. In addition, as at September 30,
2022, 31 drilling rigs have been reactivated and upgraded
during 2022.
- Long-term debt, net of cash, was reduced by $25.1 million since December 31, 2021.
- In the nine months ended September 30,
2022, a total of five rigs have been contracted or
re-contracted in the Company's Middle
East division. By mid-2023, the Company expects seven of the
eight marketed rigs in the Middle
East will be active and operating on long-term
contracts.
- Subsequent to September 30, 2022,
the Company announced the sale of its Canadian directional drilling
business, including all operating assets and personnel, for a
purchase price of $5.0 million to
Cathedral Energy Services Ltd. ("Cathedral"). The purchase price
has been satisfied through the issuance of 7,017,988 common shares
of Cathedral that were conveyed to the Company.
- The Company is also pleased to announce the publication of
their second annual Sustainability Report for the year-ended
December 30, 2021. The report,
available at esg.ensignenergy.com, highlights the Company's
environmental, social, and governance ("ESG") performance
over the past year. The report enhances ESG disclosure on diversity
and inclusion, ESG governance, supply chain governance, and
innovative emission reducing solutions.
OVERVIEW
Revenue for the third quarter of 2022 was $432.6 million, a 61 percent increase from
$268.6 million in revenue for
the third quarter of 2021. Revenue for the nine months ended
September 30, 2022, was $1,109.3 million, an increase of 59 percent from
revenue for the nine months ended September
30, 2021, of $699.4
million.
Adjusted EBITDA totaled $105.4
million ($0.54 per common
share) in the third quarter of 2022, 76 percent higher than
Adjusted EBITDA of $59.8 million
($0.37 per common share) in the third
quarter of 2021. For the first nine months ended September 30, 2022, Adjusted EBITDA totaled
$243.7 million ($1.37 per common share), 57 percent higher than
Adjusted EBITDA of $155.3 million
($0.96 per common share) in the first
nine months ended September 30,
2021.
Net income attributable to common shareholders for
the third quarter of 2022 was $17.8
million ($0.11 per common
share) compared to a net loss attributable to common shareholders
of $34.4 million ($0.21 per common share) for the third quarter of
2021. Net loss attributable to common shareholders for the
nine months ended September 30, 2022,
was $3.8 million ($0.02 per common share), compared to a net loss
attributable to common shareholders of $130.2 million ($0.80 per common share) for the nine months ended
September 30, 2021.
Funds flow from operations increased 84 percent to $103.3 million ($0.53 per common share) in the third quarter of
2022 compared to $56.2 million
($0.35 per common share) in the third
quarter of the prior year. Funds flow from operations increased 82
percent to $261.6 million
($1.47 per common share) for the nine
months ended September 30, 2022,
compared to $144.1 million
($0.89 per common share) for the nine
months ended September 30, 2021.
While the macro-economic conditions impacting the crude oil and
natural gas industry continue to fluctuate, the general outlook for
oilfield services continues to be positive reflecting
year-over-year increases in oilfield services demand and activity.
Global inflationary concerns have continued to prompt central banks
to tighten monetary policies. Increasing interest rates, largely
resulting from efforts to quell rising inflation, have subsequently
led to uncertainty for global economies regarding recession risk
and contracting economic growth. These factors continue to impact
global energy commodity prices and add uncertainty to the
macro-outlook over the short-term.
However, despite the recent pull back in global crude oil
commodity prices, demand for crude oil continues to improve
year-over-year. Furthermore, OPEC+ nations continue to moderate
supply and most recently announced supply cuts to current output,
further tightening supply. Tight supply, coupled with positive
commodity prices, have resulted in increased demand for oilfield
services, driving both improved activity and drilling rig rates in
the Company's North American segments year-over-year.
Over the near term, there is considerable uncertainty regarding
the impacts of ongoing hostilities in Ukraine on the global economy, overall
economic health and recession risk in certain of our operating
environments. Furthermore, there are a myriad of 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 higher in the three and nine
months ended September 30, 2022, when
compared to the same periods in 2021. Operations were positively
impacted by supportive industry conditions, driving activity
improvements year-over-year.
The average United States
dollar exchange rate was $1.28 for
the nine months ended September 30,
2022 (2021 - $1.25) versus the
Canadian dollar, an increase of two percent, compared to the same
period of 2021.
The Company's working capital at September 30, 2022, was a
surplus of $136.4 million, compared
to a surplus of $104.2 million at
December 31, 2021. The Company's
available liquidity, consisting of cash and available borrowings
under its $900.0 million revolving
credit facility (the "Credit Facility"), was $48.0 million at September 30, 2022.
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
September 30
|
|
Nine months ended
September 30
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Revenue
|
$
432,550
|
|
$
268,578
|
|
61
|
|
$
1,109,349
|
|
$
699,428
|
|
59
|
Adjusted EBITDA
1
|
105,358
|
|
59,769
|
|
76
|
|
243,655
|
|
155,312
|
|
57
|
Adjusted EBITDA per
common share 1
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.54
|
|
$0.37
|
|
46
|
|
$1.37
|
|
$0.96
|
|
43
|
Diluted
|
$0.54
|
|
$0.36
|
|
50
|
|
$1.36
|
|
$0.95
|
|
43
|
Net income (loss)
attributable to common shareholders
|
17,782
|
|
(34,398)
|
|
nm
|
|
(3,769)
|
|
(130,240)
|
|
(97)
|
Net income (loss)
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.11
|
|
$(0.21)
|
|
nm
|
|
$(0.02)
|
|
$(0.80)
|
|
(97)
|
Diluted
|
$0.11
|
|
$(0.21)
|
|
nm
|
|
$(0.02)
|
|
$(0.80)
|
|
(98)
|
Cash provided by
operating activities
|
44,353
|
|
59,399
|
|
(25)
|
|
198,465
|
|
139,421
|
|
42
|
Funds flow from
operations
|
103,321
|
|
56,198
|
|
84
|
|
261,595
|
|
144,051
|
|
82
|
Funds flow from
operations per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$0.53
|
|
$0.35
|
|
51
|
|
$1.47
|
|
$0.89
|
|
65
|
Diluted
|
$0.52
|
|
$0.34
|
|
53
|
|
$1.46
|
|
$0.88
|
|
66
|
Long-term debt, net of
cash
|
1,415,520
|
|
1,418,997
|
|
—
|
|
1,415,520
|
|
1,418,997
|
|
—
|
Weighted average common
shares - basic (000s)
|
183,713
|
|
162,481
|
|
13
|
|
178,246
|
|
162,385
|
|
10
|
Weighted average common
shares - diluted (000s)
|
185,131
|
|
163,444
|
|
13
|
|
179,520
|
|
162,845
|
|
10
|
Drilling
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Number of marketed
rigs 2
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
123
|
|
127
|
|
(3)
|
|
123
|
|
127
|
|
(3)
|
United
States
|
89
|
|
93
|
|
(4)
|
|
89
|
|
93
|
|
(4)
|
International
4
|
34
|
|
42
|
|
(19)
|
|
34
|
|
42
|
|
(19)
|
Total
|
246
|
|
262
|
|
(6)
|
|
246
|
|
262
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days
5
|
|
|
|
|
|
|
|
|
|
|
|
Canada
3
|
4,009
|
|
2,846
|
|
41
|
|
10,106
|
|
5,750
|
|
76
|
United
States
|
4,937
|
|
3,074
|
|
61
|
|
12,902
|
|
8,554
|
|
51
|
International
4
|
996
|
|
929
|
|
7
|
|
2,899
|
|
2,632
|
|
10
|
Total
|
9,942
|
|
6,849
|
|
45
|
|
25,907
|
|
16,936
|
|
53
|
Well
Servicing
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Number of
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
52
|
|
52
|
|
—
|
|
52
|
|
52
|
|
—
|
United
States
|
48
|
|
48
|
|
—
|
|
48
|
|
48
|
|
—
|
Total
|
100
|
|
100
|
|
—
|
|
100
|
|
100
|
|
—
|
Operating
hours
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
12,857
|
|
9,316
|
|
38
|
|
36,216
|
|
26,433
|
|
37
|
United
States
|
32,877
|
|
32,452
|
|
1
|
|
93,291
|
|
95,497
|
|
(2)
|
Total
|
45,734
|
|
41,768
|
|
9
|
|
129,507
|
|
121,930
|
|
6
|
nm
|
- calculation not meaningful
|
1.
|
Refer to Adjusted EBITDA calculation in
Non-GAAP Measures
|
2.
|
Total owned
rigs: Canada - 137, United States - 126, International - 46 (2021
total owned rigs: Canada - 153, United States - 136, International
- 53)
|
3.
|
Excludes
coring rigs.
|
4.
|
Includes
workover rigs.
|
5.
|
Defined as
contract drilling days, between spud to rig release.
|
FINANCIAL POSITION AND CAPITAL EXPENDITURES
HIGHLIGHTS
As at ($
thousands)
|
September
30 2022
|
|
December 31
2021
|
|
September 30
2021
|
Working capital 1,
2
|
136,435
|
|
104,228
|
|
79,311
|
Cash
|
29,994
|
|
13,305
|
|
24,326
|
Long-term
debt
|
1,445,514
|
|
1,453,884
|
|
1,443,323
|
Long-term debt, net of
cash
|
1,415,520
|
|
1,440,579
|
|
1,418,997
|
Total long-term
financial liabilities 2
|
1,458,352
|
|
1,465,858
|
|
1,453,404
|
Total assets
|
3,176,408
|
|
2,977,054
|
|
3,006,840
|
Long-term debt to
long-term debt plus equity ratio
|
0.53
|
|
0.55
|
|
0.54
|
1
|
See Non-GAAP Measures section.
|
2
|
Comparative working capital and total long-term
financial liabilities has been revised to conform with current
year's presentation
|
|
Three months ended
September 30
|
|
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
% change
|
|
|
|
2022
|
|
|
2021
|
|
|
% change
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upgrade/growth
|
18,429
|
|
|
9,502
|
|
|
94
|
|
|
|
55,015
|
|
|
17,097
|
|
|
nm
|
Maintenance
|
28,495
|
|
|
8,498
|
|
|
nm
|
|
|
|
78,139
|
|
|
25,242
|
|
|
nm
|
Proceeds
from disposals of property and equipment
|
—
|
|
|
(1,665)
|
|
|
nm
|
|
|
|
(46,936)
|
|
|
(4,647)
|
|
|
nm
|
Net capital
expenditures before acquisitions
|
46,924
|
|
|
16,335
|
|
|
nm
|
|
|
|
86,218
|
|
|
37,692
|
|
|
nm
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
—
|
|
|
117,928
|
|
|
nm
|
|
|
|
—
|
|
|
117,928
|
|
|
nm
|
Net capital
expenditures
|
46,924
|
|
|
134,263
|
|
|
(65)
|
|
|
|
86,218
|
|
|
155,620
|
|
|
(45)
|
nm
|
- calculation not
meaningful
|
REVENUE AND OILFIELD SERVICES EXPENSE
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
123,364
|
|
74,469
|
|
66
|
|
313,314
|
|
159,436
|
|
97
|
United
States
|
247,432
|
|
140,309
|
|
76
|
|
617,762
|
|
386,535
|
|
60
|
International
|
61,754
|
|
53,800
|
|
15
|
|
178,273
|
|
153,457
|
|
16
|
Total
revenue
|
432,550
|
|
268,578
|
|
61
|
|
1,109,349
|
|
699,428
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield services
expense
|
314,433
|
|
198,813
|
|
58
|
|
829,836
|
|
516,049
|
|
61
|
Revenue for the three months ended September 30, 2022, totaled
$432.6 million, an increase of 61
percent from the third quarter 2021 of $268.6 million. Revenue for the nine months ended
September 30, 2022, totaled $1,109.3
million, a 59 percent increase from the nine months ended
September 30, 2021.
The increase in total revenue during the third quarter of 2022
was primarily due to favourable industry conditions and supportive
oil and natural gas commodity prices, increasing demand for
oilfield service. A positive foreign exchange translation impact
further contributed to the increase in revenue reported in Canadian
currency.
CANADIAN OILFIELD SERVICES
Revenue increased 66 percent to $123.4
million for the three months ended September 30, 2022,
from $74.5 million for the three
months ended September 30, 2021. The Company recorded revenue
of $313.3 million in Canada for the nine months ended September 30, 2021, an increase of 97
percent from $159.4 million recorded
for the nine months ended September 30,
2021.
Canadian revenue accounted for 29 percent of the Company's total
revenue in the third quarter of 2022 (2021 - 28 percent) and 28
percent (2021 - 23 percent) for the first nine months of
2022.
The Company's Canadian drilling operations recorded 4,009
operating days in the third quarter of 2022, compared to
2,846 operating days for the third quarter of 2021, an
increase of 41 percent. For the nine months ended
September 30, 2022, the Company recorded 10,106 operating days
compared to 5,750 days for the nine months ended September 30,
2021, an increase of 76 percent. Canadian well servicing hours
increased by 38 percent to 12,857 operating hours in the third
quarter of 2022 compared to 9,316 operating hours in the
corresponding period of 2021. For the nine months ended
September 30, 2022, well servicing hours increased by 37
percent to 36,216 operating hours compared with 26,433 operating
hours for the nine months ended September 30, 2021.
The operating and financial results for the Company's Canadian
operations during the first nine months of 2022 were positively
impacted by improved industry conditions that increased both
drilling and well servicing activity. In addition, operational
activity increased as a result of the Company's timing of the
acquisition of 35 land-based drilling rigs in the third quarter of
2021. Offsetting the increase in results was the elimination of the
Canada Emergency Wage Subsidy
("CEWS") program in 2021 by the Government of Canada, from which $5.3
million and $15.1 million were
received by the Company during the third quarter and the first nine
months of 2021 respectively.
During the first nine months of 2022, the Company transferred
four under-utilized drilling rigs into its Canadian operations
reserve fleet.
UNITED STATES OILFIELD
SERVICES
The Company's United States
operations recorded revenue of $247.4 million in the
third quarter of 2022, an increase of 76 percent from the
$140.3 million recorded in the
corresponding period of the prior year. During the nine months
ended September 30, 2022, revenue of $617.8 million was recorded, an increase of 60
percent from the $386.5 million
recorded in the corresponding period of the prior year.
The Company's United States
operations accounted for 57 percent of the Company's revenue in the
third quarter of 2022 (2021 - 52 percent) and 56
percent of the Company's revenue in the first nine months of
2022 (2021 - 55 percent).
Drilling rig operating days increased by 61 percent to
4,937 operating days in the third quarter of 2022 from 3,074
operating days in the third quarter of 2021, and increased by 51
percent to 12,902 operating days in the first nine months of 2022
from 8,554 operating days in the first nine months of 2021.
United States well servicing hours
increased by one percent in the third quarter of 2022 to 32,877
operating hours from 32,452 operating hours in the third quarter of
2021. For the first nine months of 2022, well servicing activity
decreased by two percent to 93,291 operating hours from 95,497
operating hours for the first nine months of 2021.
Overall operating and financial results for the Company's
United States operations reflect
improving industry conditions, increasing drilling activity and rig
revenue rates in addition to steady well servicing rig utilization.
The financial results from the Company's United States operations were further
positively impacted on the currency translation, as the United States dollar strengthened relative
to the Canadian dollar for the first nine months of 2022.
During the first nine months of 2022, the Company sold one cold
stacked drilling rig from its United
States operations and transferred three under-utilized
drilling rigs into its United
States reserve fleet.
INTERNATIONAL OILFIELD SERVICES
The Company's international operations recorded revenue of
$61.8 million in the third quarter of
2022, a 15 percent increase from the $53.8 million recorded in the corresponding
period of the prior year. International revenues for the nine
months ended September 30, 2022, increased 16 percent to
$178.3 million from $153.5 million recorded for the nine months ended
September 30, 2021.
The Company's international operations contributed 14 percent of
the total revenue in the third quarter of 2022 (2021 - 20
percent) and 16 percent of the Company's revenue in the first nine
months of 2022 (2021 - 22 percent).
International operating days for the three months ended
September 30, 2022, totaled 996 operating days compared to
929 operating days in the same period of 2021, an increase of
seven percent. For the nine months ended September 30, 2022,
international operating days totaled 2,899 operating days compared
to 2,632 operating days for the nine months ended
September 30, 2021, an increase of 10 percent.
Operating and financial results from the international
operations reflect a steady and incrementally positive operating
environment as COVID-19 related disruptions continued to
dissipate.
During the first nine months of 2022, the Company sold two
cold-stacked drilling rigs located in Mexico for US $34.0
million and transferred six under-utilized drilling rigs
into its international operations reserve fleet.
DEPRECIATION
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Depreciation
|
69,433
|
|
73,261
|
|
(5)
|
|
208,105
|
|
213,994
|
|
(3)
|
Depreciation expense totaled $69.4
million for the third quarter of 2022 compared with
$73.3 million for the
third quarter of 2021, a decrease of five percent.
Depreciation expense for the first nine months of 2022 decreased by
three percent, to $208.1 million
compared with $214.0 million for the
first nine months of 2021. The decrease in depreciation is due to
certain operating assets having become fully depreciated in which
case no further depreciation expense will be incurred on such
assets. Offsetting the decrease to the depreciation expense are
additional capital expenditures and the negative impact of the
foreign exchange translation on converting USD denominated
depreciation expense.
GENERAL AND ADMINISTRATIVE
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
General and
administrative
|
12,759
|
|
9,996
|
|
28
|
|
35,858
|
|
28,067
|
|
28
|
% of revenue
|
2.9
|
|
3.7
|
|
|
|
3.2
|
|
4.0
|
|
|
General and administrative expense increased 28 percent to
$12.8 million (2.9 percent of
revenue) for the third quarter of 2022 compared to $10.0 million (3.7 percent of revenue) for the
third quarter of 2021. For the nine months ended September 30, 2022, general and administrative
expense totaled $35.9 million (3.2
percent of revenue) compared to $28.1
million (4.0 percent of revenue) for the nine months ended
September 30, 2021. General and
administrative expense on a per operating day basis decreased by
eight and 11 percent, respectively for the three and nine months
ended September 30, 2022, compared to
the prior periods. On an overall basis, the general and
administrative expense increased in support of increased
operational activity, the end of funding from the CEWS program
($0.5 million and $2.0 million were received during the third
quarter and the first nine months of 2021 respectively), the full
reinstatement of salary rollbacks and annual wage increases.
Further increasing the general and administrative expense was the
negative foreign exchange translation on converting USD denominated
general and administrative expense.
FOREIGN EXCHANGE AND OTHER (GAIN) LOSS
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Foreign exchange and
other (gain) loss
|
(12,677)
|
|
(1,317)
|
|
nm
|
|
(9,975)
|
|
11,310
|
|
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 ASSET SALE
|
Three months ended
September 30
|
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
% change
|
|
|
2022
|
|
|
2021
|
|
|
% change
|
Gain on asset
sale
|
(502)
|
|
|
—
|
|
|
nm
|
|
|
(31,798)
|
|
|
—
|
|
|
nm
|
nm
|
- calculation not meaningful
|
During the first nine months ended September 30, 2022, the Company finalized the
sale of two drilling rigs that were cold-stacked in Mexico and other unrelated equipment. The net
cash proceeds received for two drilling rigs were US $33.1 million, resulting in a gain of US
$23.9 million or Canadian
$29.9 million.
INTEREST EXPENSE
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Interest
expense
|
32,438
|
|
25,536
|
|
27
|
|
85,185
|
|
72,569
|
|
17
|
Interest expense was incurred on the Company's $900.0 million Credit Facility, US $417.5 million Senior Notes, $37.0 million subordinate convertible debentures
(the "Convertible Debentures") prior to conversion,
capital lease and other obligations.
Interest expense increased by 27 percent for the third
quarter of 2022 compared to the third quarter of 2021. Interest
expense increased by 17 percent for the first nine months ended
September 30, 2022, compared to the
same period of 2021. The increases for the three and nine months of
2022 are the result of higher overall borrowing and higher interest
rates. The negative translational impact on United States dollar-denominated debt further
increased interest expense for the quarter.
The Company's blended interest rate on its outstanding debt for
the 2022 year will be approximately eight percent. The current
capital structure primarily consisting of the Credit Facility and
the Senior Notes allows the Company to utilize funds flow generated
to reduce debt in the near term with greater flexibility than a
more non-callable weighted capital structure.
INCOME TAXES (RECOVERY)
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Current income taxes
(recovery)
|
318
|
|
167
|
|
90
|
|
(1,444)
|
|
693
|
|
nm
|
Deferred taxes income
(recovery)
|
2,082
|
|
(6,978)
|
|
nm
|
|
(17,574)
|
|
(27,750)
|
|
(37)
|
Total income taxes
(recovery)
|
2,400
|
|
(6,811)
|
|
nm
|
|
(19,018)
|
|
(27,057)
|
|
(30)
|
Effective income tax
rate (%)
|
11.8
|
|
16.7
|
|
(29)
|
|
84.5
|
|
17.6
|
|
nm
|
nm
|
- calculation not meaningful
|
The effective income tax rate for the three months ended
September 30, 2022, was 11.8 percent compared to 16.7
percent for the three months ended September 30, 2021.
The effective income tax rate for the nine months
ended September 30, 2022, was 84.5 percent compared
to 17.6 percent for the nine months ended
September 30, 2021. The effective income tax rate in the first
nine months of the current year was higher than the effective
income tax rate in the same period of 2021 due to increased
activity levels, gains on disposal of assets and lower tax
recoveries in foreign tax jurisdictions.
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL
($ thousands, except
per common share data)
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Cash provided by
operating activities
|
44,353
|
|
59,399
|
|
(25)
|
|
198,465
|
|
139,421
|
|
42
|
Funds flow from
operations
|
103,321
|
|
56,198
|
|
84
|
|
261,595
|
|
144,051
|
|
82
|
Funds flow from
operations per common share
|
$0.53
|
|
$0.35
|
|
51
|
|
$1.47
|
|
$0.89
|
|
65
|
Working capital
1
|
136,435
|
|
104,228
|
|
31
|
|
136,435
|
|
104,228
|
|
31
|
1
|
Comparative figure as at December 31,
2021
|
During the three months ended September 30, 2022, the Company
generated funds flow from operations of $103.3 million ($0.53 per common share) compared to funds
flow from operations of $56.2 million
($0.35 per common share) for the
three months ended September 30, 2021, an increase of 84
percent. For the nine months ended September 30, 2022, the
Company generated funds flow from operations of $261.6 million ($1.47 per common share) an increase of 82 percent
from $144.1 million ($0.89 per common share) for the nine months ended
September 30, 2021. The increase in funds flow from operations
for the nine months ended September 30,
2022, compared to the same period of 2021 is largely due to
the increase in activity compared to the prior period as a result
of the oil and natural gas industry's improving operating
environment.
At September 30, 2022, the Company's working capital was a
surplus of $136.4 million, compared
to a working capital surplus of $104.2
million at December 31, 2021. 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 $18.0
million was undrawn and available at September 30,
2022.
INVESTING ACTIVITIES
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
—
|
|
(117,928)
|
|
nm
|
|
0
|
|
(117,928)
|
|
nm
|
Purchase of property
and equipment
|
(46,924)
|
|
(18,000)
|
|
nm
|
|
(133,154)
|
|
(42,339)
|
|
nm
|
Proceeds from disposals
of property and equipment
|
—
|
|
1,665
|
|
nm
|
|
46,936
|
|
4,647
|
|
nm
|
Distribution to
non-controlling interest
|
—
|
|
—
|
|
nm
|
|
(1,852)
|
|
—
|
|
nm
|
Net change in non-cash
working capital
|
7,059
|
|
1,118
|
|
nm
|
|
15,961
|
|
2,121
|
|
nm
|
Cash used in investing
activities
|
(39,865)
|
|
(133,145)
|
|
(70)
|
|
(72,109)
|
|
(153,499)
|
|
(53)
|
nm
|
- calculation not meaningful
|
Net purchases of property and equipment for the third quarter of
2022 totaled $46.9 million (2021
- $134.3 million). Net purchases
of property and equipment during the first nine months of 2022
totaled $86.2 million (2021 -
$155.6 million). The purchase of
property and equipment for the first nine months of 2022 consists
of $55.0 million in upgrade and
growth capital and $78.2 million in
maintenance capital.
FINANCING ACTIVITIES
|
Three months ended
September 30
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Proceeds from long-term
debt
|
22,585
|
|
110,595
|
|
(80)
|
|
51,190
|
|
149,126
|
|
(66)
|
Repayments of long-term
debt
|
(17,618)
|
|
(18,180)
|
|
(3)
|
|
(83,012)
|
|
(84,743)
|
|
(2)
|
Lease obligation
principal
repayments
|
(1,884)
|
|
(1,905)
|
|
(1)
|
|
(6,073)
|
|
(5,132)
|
|
18
|
Interest
paid
|
(16,449)
|
|
(11,306)
|
|
45
|
|
(70,336)
|
|
(61,157)
|
|
15
|
Purchase of common
shares held in trust
|
(347)
|
|
(310)
|
|
12
|
|
(1,127)
|
|
(794)
|
|
42
|
Cash used in financing
activities
|
(13,713)
|
|
78,894
|
|
nm
|
|
(109,358)
|
|
(2,700)
|
|
nm
|
nm
|
- calculation not meaningful
|
The Company's available bank facilities consist of a $900.0 million Credit Facility, of which
$18.0 million was available and
undrawn as of September 30, 2022. In
addition, the Company has available US $50.0
million secured letter of credit facility, of which US
$3.6 million was available as of
September 30, 2022.
On June 7, 2022, the Company
settled its Convertible Debentures of $37.0
million through the issuance of 21,142,857 common shares of
the Company at conversion price of $1.75. The holders' elections to convert the
Convertible Debentures were made following the issue of notice by
the Company.
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. No
such repurchases occurred during the nine months ended September 30, 2022.
Covenants
The following is a list of the Company's currently applicable
covenants and the calculations as at September 30, 2022:
|
Covenant
|
|
|
September 30,
2022
|
The Credit
Facility
|
|
|
|
|
Consolidated
EBITDA1
|
> 140.0
million
|
|
|
301,516
|
Consolidated EBITDA to
Consolidated Interest Expense1,2
|
≥ 2.25
|
|
|
2.83
|
Consolidated Senior
Debt to Consolidated EBITDA1,3
|
≤ 3.25
|
|
|
2.83
|
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 September 30, 2022, 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 and restatement of the credit agreement,
dated December 17, 2021, permitted
encumbrances are limited to $25.0
million.
The Senior Notes
The note 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 note 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 September 30, 2022, 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 four percent of the
Company's consolidated tangible assets.
NEW BUILDS AND MAJOR RETROFITS
During the first nine months ended September 30, 2022, the Company transferred four,
three and six under-utilized drilling rigs to its Canadian,
United States and international
operations reserve fleet respectively. In addition, the Company
sold one cold stacked drilling rig from its United States operations and two cold-stacked
drilling rigs from its international operations. The Company's
projected capital expenditures in 2022 are expected to be
approximately $165.0 million of which
$60.0 million relates to upgrade and
growth capital. Within the upgrade and growth capital, two drilling
rigs will be reactivated in Oman
in the fourth quarter of 2022, as well as a third in the first half
of 2023. In addition, as at September 30,
2022, 31 drilling rigs have been reactivated and upgraded
during 2022.
OUTLOOK
Industry Overview
The outlook for oilfield services continues to be positive with
steady demand for services and tightening rig supply, particularly
in the Company's North American operating segments. Despite the
recent pullback in global crude oil commodity prices, demand for
crude oil continues to improve year-over-year. Furthermore, OPEC+
nations continue to moderate supply and most recently announced
supply cuts to current output, likely further tightening future
supply.
Inflationary concerns have continued to prompt central banks to
tighten monetary policy. Rising interest rates largely resulting
from efforts to quell high inflation have subsequently led to
uncertainty for global economies regarding recession risk and
contracting economic growth. These factors continue to impact
global commodity prices and have led to a recent pullback in
commodity prices and increased price volatility. The average
benchmark price of West Texas Intermediate ("WTI") was US
$94/bbl in August 2022 and decreased to US $88/bbl in October
2022.
We expect crude oil and natural gas demand to remain relatively
steady and anticipate that tight supply in a positive commodity
price environment may support steady oilfield services activity and
drive rate improvements during the remainder of 2022 and into 2023.
While we continue to expect oil and natural gas producers to remain
committed to prioritizing shareholder returns, higher oilfield
service industry utilization is expected to drive day-rate pricing
improvements year-over-year in the Company's North American
segments.
Over the short-term, there is considerable uncertainty regarding
macroeconomic conditions that may impact supply and demand for, and
pricing of crude oil and natural gas and related oilfield services.
These factors include but are not limited to, recession risk and
global economic health, the impact of ongoing hostilities in
Ukraine, and the future supply of
Russian oil and natural gas to Europe.
Canadian Activity
Canadian activity, currently representing 28 percent of total
Company revenue year to date, improved in the third quarter due to
supportive industry conditions. We expect activity to continue to
improve over the fourth quarter and into the first quarter of 2023
as operations enter the winter drilling season.
As of November 3, 2022, of our 123
marketed Canadian drilling rigs, approximately 45 percent are
engaged under term contracts of various durations. Approximately 42
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,
currently representing 56 percent of total Company revenue year to
date, improved during the third quarter of 2022, due to supportive
industry conditions, and is expected to remain steady to modestly
improve in the fourth quarter and into the first quarter of
2023.
As of November 3, 2022, of our 89
marketed United States drilling
rigs, approximately 70 percent are engaged under term contracts of
various durations. Approximately 15 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, currently representing 16 percent of
total Company revenue year to date, remained steady over the third
quarter. International activity is expected to strongly improve in
the fourth quarter of 2022 and into 2023, as a total of five rigs
have been contracted or re-contracted in the Company's Middle East division in the nine-months ended
September 30, 2022. By mid-2023, the
Company expects seven of the eight marketed rigs in the
Middle East will be active and
operating on long-term contracts. The Company expects two rigs
active in Bahrain, two rigs active
in Kuwait to remain steady, and
two rigs in Oman are expected to
commence drilling programs in the fourth quarter of 2022 with a
third Oman rig expected to
activate in the first half of 2023. Operations in Australia are expected to remain steady over
the fourth quarter and incrementally improve in 2023. Operations in
Argentina, with two rigs active,
are also expected remain steady in the fourth quarter of
2022.
As of November 3, 2022, of our 34
marketed international drilling rigs, approximately 53 percent are
engaged under term contracts of various durations. Approximately 67
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
The Company is subject to several risks and uncertainties. A
discussion of certain risks faced by the Company may be found under
the "Risk Factors" section of the Company's Annual Information Form
("AIF") and the "Risks and Uncertainties" section of the
Company's Management's Discussion & Analysis
("MD&A") for the year ended December 31, 2021, which are available under the
Company's SEDAR profile at www.sedar.com.
Other than as described within this document, the Company's risk
factors and management of those risks have not changed
substantially from those as disclosed in the AIF. Additional risks
and uncertainties not presently known by the Company, or that the
Company does not currently anticipate or deem material, may also
impair the Company's future business operations or financial
condition. If any of the potential events described in the risk
factors in this document or the Company's AIF actually occur, or
describe events intensify, overall business, operating results and
the financial condition of the Company could be materially
adversely affected.
CONFERENCE CALL
A conference call will be held to discuss the Company's third
quarter 2022 results at 10:00 a.m.
MDT (12:00 p.m. EDT) on
Friday, November 4, 2022. The
conference call number is 1-416-764-8659 (in Toronto) or 1-888-664-6392 (outside
Toronto). The conference call
reservation number is: 51958340. A taped recording will be
available until November 11, 2022, by
dialing 1-416-764-8677 (in Toronto) or 1-888-390-0541 (outside
Toronto) and entering the
reservation number 958340#. 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
|
|
September 30
2022
|
|
December 31
2021
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
|
$
29,994
|
|
$
13,305
|
Accounts
receivable
|
|
339,451
|
|
226,807
|
Inventories, prepaid
and other
|
|
50,212
|
|
49,172
|
Income taxes
receivable
|
|
146
|
|
580
|
Total current
assets
|
|
419,803
|
|
289,864
|
Property and
equipment
|
|
2,562,613
|
|
2,512,953
|
Deferred income
taxes
|
|
193,992
|
|
174,237
|
Total assets
|
|
$
3,176,408
|
|
$ 2,977,054
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
accruals
|
|
$
274,991
|
|
$
177,932
|
Share-based
compensation
|
|
2,352
|
|
1,055
|
Income taxes
payable
|
|
971
|
|
1,389
|
Current portion of
lease obligation
|
|
5,054
|
|
5,260
|
Total current
liabilities
|
|
283,368
|
|
185,636
|
|
|
|
|
|
Share-based
compensation
|
|
13,139
|
|
7,966
|
Long-term
debt
|
|
1,445,514
|
|
1,453,884
|
Lease
obligations
|
|
5,631
|
|
4,327
|
Income tax
payable
|
|
7,207
|
|
7,647
|
Deferred income
taxes
|
|
134,043
|
|
120,100
|
Non-controlling
interest
|
|
—
|
|
4,832
|
Total
liabilities
|
|
1,888,902
|
|
1,784,392
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Shareholders'
capital
|
|
268,410
|
|
230,376
|
Contributed
surplus
|
|
22,929
|
|
23,197
|
Equity component of
convertible debenture
|
|
—
|
|
2,380
|
Accumulated other
comprehensive income
|
|
286,535
|
|
223,308
|
Retained
earnings
|
|
709,632
|
|
713,401
|
Total shareholders'
equity
|
|
1,287,506
|
|
1,192,662
|
Total liabilities and
shareholders' equity
|
|
$
3,176,408
|
|
$ 2,977,054
|
Ensign Energy Services Inc.
Consolidated Statements of
Income (Loss)
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September 30
2022
|
|
September 30
2021
|
|
September 30
2022
|
|
September 30
2021
|
(Unaudited - in
thousands of Canadian dollars, except per common share
data)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
432,550
|
|
$
268,578
|
|
$
1,109,349
|
|
$
699,428
|
Expenses
|
|
|
|
|
|
|
|
|
Oilfield
services
|
|
314,433
|
|
198,813
|
|
829,836
|
|
516,049
|
Depreciation
|
|
69,433
|
|
73,261
|
|
208,105
|
|
213,994
|
General and
administrative
|
|
12,759
|
|
9,996
|
|
35,858
|
|
28,067
|
Restructuring
|
|
—
|
|
697
|
|
—
|
|
4,230
|
Share-based
compensation
|
|
(5,910)
|
|
(440)
|
|
8,049
|
|
6,382
|
Foreign exchange and
other (gain) loss
|
|
(12,677)
|
|
(1,317)
|
|
(9,975)
|
|
11,310
|
Total
expenses
|
|
378,038
|
|
281,010
|
|
1,071,873
|
|
780,032
|
Income (loss) before
interest expense, accretion of deferred financing charges and other
gains and income taxes
|
54,512
|
|
(12,432)
|
|
37,476
|
|
(80,604)
|
|
|
|
|
|
|
|
|
|
Gain on repurchase of
unsecured Senior Notes
|
|
—
|
|
—
|
|
—
|
|
(7,431)
|
Gain on asset
sale
|
|
(502)
|
|
—
|
|
(31,798)
|
|
—
|
Interest
expense
|
|
32,438
|
|
25,536
|
|
85,185
|
|
72,569
|
Accretion of deferred
financing charges
|
|
2,200
|
|
2,702
|
|
6,601
|
|
8,109
|
Income (loss) before
income taxes
|
|
20,376
|
|
(40,670)
|
|
(22,512)
|
|
(153,851)
|
Income taxes
(recovery)
|
|
|
|
|
|
|
|
|
Current income taxes
(recovery)
|
|
318
|
|
167
|
|
(1,444)
|
|
693
|
Deferred income taxes
(recovery)
|
|
2,082
|
|
(6,978)
|
|
(17,574)
|
|
(27,750)
|
Total income taxes
(recovery)
|
|
2,400
|
|
(6,811)
|
|
(19,018)
|
|
(27,057)
|
Net income (loss)
from continuing operations
|
|
17,976
|
|
(33,859)
|
|
(3,494)
|
|
(126,794)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations
|
|
—
|
|
(523)
|
|
—
|
|
(3,422)
|
Net income
(loss)
|
|
$
17,976
|
|
$
(34,382)
|
|
$
(3,494)
|
|
$
(130,216)
|
Net income (loss)
attributable to:
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
17,782
|
|
(34,398)
|
|
(3,769)
|
|
(130,240)
|
Non-controlling
interests
|
|
194
|
|
16
|
|
275
|
|
24
|
|
|
17,976
|
|
(34,382)
|
|
(3,494)
|
|
(130,216)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.11
|
|
$
(0.21)
|
|
$
(0.02)
|
|
$
(0.80)
|
Diluted
|
|
$
0.11
|
|
$
(0.21)
|
|
$
(0.02)
|
|
$
(0.80)
|
Ensign Energy Services Inc.
Consolidated Statements
of Cash Flows
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September 30
2022
|
|
September 30
2021
|
|
September 30
2022
|
|
September 30
2021
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
|
|
|
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
17,976
|
|
$
(34,382)
|
|
$
(3,494)
|
|
$
(130,216)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation
|
|
69,433
|
|
73,261
|
|
208,105
|
|
213,994
|
Gain on asset
sale
|
|
(502)
|
|
—
|
|
(31,798)
|
|
—
|
Gain on purchase of
unsecured Senior Notes
|
|
—
|
|
—
|
|
—
|
|
(7,431)
|
Share-based
compensation, net cash settlements
|
|
(5,945)
|
|
(440)
|
|
6,313
|
|
6,382
|
Unrealized foreign exchange and other
|
|
(14,361)
|
|
(3,501)
|
|
8,257
|
|
8,394
|
Accretion of deferred
financing charges
|
|
2,200
|
|
2,702
|
|
6,601
|
|
8,109
|
Interest
expense
|
|
32,438
|
|
25,536
|
|
85,185
|
|
72,569
|
Deferred income taxes
(recovery)
|
|
2,082
|
|
(6,978)
|
|
(17,574)
|
|
(27,750)
|
Funds flow from
operations
|
|
103,321
|
|
56,198
|
|
261,595
|
|
144,051
|
Net change in non-cash
working capital
|
|
(58,968)
|
|
3,201
|
|
(63,130)
|
|
(4,630)
|
Cash provided by
operating activities
|
|
44,353
|
|
59,399
|
|
198,465
|
|
139,421
|
Investing
activities
|
|
|
|
|
|
|
|
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
|
—
|
|
(117,928)
|
|
—
|
|
(117,928)
|
Purchase of property
and equipment
|
|
(46,924)
|
|
(18,000)
|
|
(133,154)
|
|
(42,339)
|
Proceeds from disposals
of property and equipment
|
|
—
|
|
1,665
|
|
46,936
|
|
4,647
|
Distribution to
non-controlling interest
|
|
—
|
|
—
|
|
(1,852)
|
|
—
|
Net change in non-cash
working capital
|
|
7,059
|
|
1,118
|
|
15,961
|
|
2,121
|
Cash used in
investing activities
|
|
(39,865)
|
|
(133,145)
|
|
(72,109)
|
|
(153,499)
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from long-term
debt
|
|
22,585
|
|
110,595
|
|
51,190
|
|
149,126
|
Repayments of long-term
debt
|
|
(17,618)
|
|
(18,180)
|
|
(83,012)
|
|
(84,743)
|
Lease obligation
principal repayments
|
|
(1,884)
|
|
(1,905)
|
|
(6,073)
|
|
(5,132)
|
Interest
paid
|
|
(16,449)
|
|
(11,306)
|
|
(70,336)
|
|
(61,157)
|
Purchase of common
shares held in trust
|
|
(347)
|
|
(310)
|
|
(1,127)
|
|
(794)
|
Cash (used in)
provided by financing activities
|
|
(13,713)
|
|
78,894
|
|
(109,358)
|
|
(2,700)
|
Net (decrease)
increase in cash
|
|
(9,225)
|
|
5,148
|
|
16,998
|
|
(16,778)
|
Effects of foreign
exchange on cash
|
|
225
|
|
(354)
|
|
(309)
|
|
(3,094)
|
Cash – beginning of
period
|
|
38,994
|
|
19,532
|
|
13,305
|
|
44,198
|
Cash – end of
period
|
|
$
29,994
|
|
$
24,326
|
|
$
29,994
|
|
$
24,326
|
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.
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 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
September 30
|
|
|
Nine months ended
September 30
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
Income (loss) before
income taxes
|
20,376
|
|
|
(40,670)
|
|
|
(22,512)
|
|
|
(153,851)
|
Add-back/(deduct):
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
32,438
|
|
|
25,536
|
|
|
85,185
|
|
|
72,569
|
Accretion of deferred
financing charges
|
2,200
|
|
|
2,702
|
|
|
6,601
|
|
|
8,109
|
Depreciation
|
69,433
|
|
|
73,261
|
|
|
208,105
|
|
|
213,994
|
Restructuring
|
—
|
|
|
697
|
|
|
—
|
|
|
4,230
|
Share-based compensation
|
(5,910)
|
|
|
(440)
|
|
|
8,049
|
|
|
6,382
|
Gain on
asset sale
|
(502)
|
|
|
—
|
|
|
(31,798)
|
|
|
—
|
Gain on
repurchase of unsecured Senior Notes 1
|
—
|
|
|
—
|
|
|
0
|
|
|
(7,431)
|
Foreign
exchange and other (gain) loss
|
(12,677)
|
|
|
(1,317)
|
|
|
(9,975)
|
|
|
11,310
|
Adjusted
EBITDA
|
105,358
|
|
|
59,769
|
|
|
243,655
|
|
|
155,312
|
1
|
See "Interest
Expense" section for definition of Senior Notes.
|
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 and information provided in the "Outlook"
section regarding the general outlook for the remainder of 2022 and
beyond, 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 commodity prices may pressure customers
to modify their capital programs; 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 and successfully bid on new
contracts; successful integration of acquisitions; the general
stability of the economic and political environments in the
jurisdictions where we operate, pandemics, and impacts of
geopolitical events such as the hostilities between Ukraine and the Russian Federation and the global community
responses thereto.
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 commodity prices; foreign exchange exposure;
fluctuations in currency and interest rates; inflation; 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; risks associated with
long-term contracts; force majeure events; pandemics;
determinations by Organization of Petroleum Exporting Countries
("OPEC") and other countries (OPEC and various other
countries are referred to as "OPEC+") regarding production
levels; loss of key customers; litigation risks, including the
Company's defence of lawsuits; risks associated with contingent
liabilities and potential unknown liabilities; availability and
cost of labour and other equipment, supplies and services; business
interruption and casualty losses; 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; availability of
sufficient cash flow to service and repay our debts; impairment of
capital assets; the Company's ability to amend or comply with
covenants under the credit facility and other debt instruments;
actions by governmental authorities; impact of and changes to laws
and regulations impacting the Company and the Company's customers,
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); safety
performance; environmental contamination; shifting interest to
alternative energy sources; environmental activism; the adequacy of
the Company's provision for taxes; tax challenges; the impact of,
and the Company's response to COVID-19 or other pandemics;
workforce and reliance on key management; technology; cybersecurity
risks; seasonality and weather; risks associated with acquisitions
and ability to successfully integrate acquisitions; risks
associated with internal controls over financial reporting; the
impact of the ongoing hostilities between Ukraine and the Russian Federation and the global community
responses thereto and other risks and uncertainties affecting the
Company's business, revenues and expenses.
In addition, 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 and the impact thereof upon the Company, its customers
and its business, new pandemics, ongoing hostilities between
Ukraine and the Russian Federation, related potential future
impact on the supply of oil and natural gas to Europe by Russia and the impact of global community
responses to the ongoing conflict.
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. Unpredictable or unknown factors not discussed in this
document could also have material adverse effects on
forward-looking statements.
Readers are cautioned that the lists of important factors
contained herein are not exhaustive. For additional information on
these and other factors that could affect the Company's business,
operations or financial condition, refer to the "Risks and
Uncertainties" section of this document and the "Risk Factors"
section of the Company's Annual Information Form for the year ended
December 31, 2021, available on SEDAR
at www.sedar.com.
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.