CALGARY,
AB, March 3, 2023 /CNW/ -
2022 HIGHLIGHTS
- Revenue for 2022 was $1,577.3
million, a 58 percent increase from 2021 revenue of
$995.6 million.
- Revenue amounts and percentage of total by geographic
area:
-
- Canada - $435.0 million, 28 percent;
- United States - $892.1 million, 56 percent; and
- International - $250.3 million,
16 percent.
- Canadian drilling recorded 13,589 operating days in 2022, a 51
percent increase from 8,979 operating days in 2021. Canadian well
servicing recorded 47,269 operating hours in 2022, a 30 percent
increase from 36,254 operating hours in 2021.
- United States drilling
recorded 17,928 operating days in 2022, a 46 percent increase from
12,242 operating days in 2021. United
States well servicing recorded 124,035 operating hours in
2022, a one percent decrease from the 124,916 operating hours in
2021.
- International drilling recorded 3,973 operating days in 2022,
an 11 percent increase from 3,574 operating days recorded in
2021.
- Adjusted EBITDA for 2022 was $373.6
million, a 75 percent increase from Adjusted EBITDA of
$213.2 million for 2021.
- Funds flow from operations for 2022 increased 95 percent to
$372.0 million from $190.7 million in the prior year.
- During 2022, the Company did not recognize any Canada Emergency Wage Subsidy program payments
as compared with $16.0 million
recognized in 2021.
- Net capital expenditures for the calendar year 2022 totaled
$126.8 million, consisting of
$68.8 million in upgrade capital,
$105.6 million in maintenance
capital, offset by proceeds of $47.5
million from equipment disposals. Within the upgrade and
growth capital, two drilling rigs were reactivated in Oman in the fourth quarter of 2022, and a
third rig in Oman will be
reactivated in the first half of 2023. In addition, as at
December 31, 2022, 31 drilling rigs
have been reactivated and upgraded during 2022. Capital
expenditures for the calendar year 2023 are targeted to be
approximately $157.0 million,
primarily related to maintenance expenditures and selective growth
projects. In addition, the Company may consider additional upgrade
or growth projects in response to customer demand and appropriate
contract terms.
- Long-term debt, net of cash, was reduced by $50.9 million since December 31, 2021. Our debt reduction for 2023 is
targeted to be approximately $200.0
million. Our target debt reduction for the period beginning
2023 to the end of 2025 is approximately $600.0 million. If industry conditions change,
this target could be increased or decreased.
- General and administrative expense increased 27 percent to
$48.6 million (3.1 percent of
revenue) for year-ended 2022 from $38.2
million (3.8 percent of revenue) for year-ended 2021.
- 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.
- During the fourth quarter of 2022, the Company sold 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 was satisfied through the
issuance of 7,017,988 common shares of Cathedral to the Company. As
part of the transaction, Cathedral and the Company have entered
into a marketing and technology alliance which will further help
support and expand the customer base of both companies in the
Canadian market.
- Due to the strong financial performance of the Company in 2022,
the annual bonus and performance share unit payments to employees
and management of the Company was capped at 5% of 2022 EBITDA, in
accordance with the Company's compensation plan. The Company
believes that this level of payments provides incentive to
employees and management to achieve strong financial performance
while at the same time providing shareholders with returns on their
investment.
OVERVIEW
Revenue for the year ended December 31, 2022 was
$1,577.3 million, an increase of 58
percent from 2021 revenue of $995.6
million. Adjusted EBITDA for 2022 totaled $373.6 million ($2.13 per common share), 75 percent higher than
Adjusted EBITDA of $213.2 million
($1.31 per common share) for the year
ended 2021.
Net income attributed to common shareholders for the
year ended December 31, 2022 was
$8.1 million ($0.05 per common share) compared with a net loss
attributed to common shareholders of $159.5
million ($0.98 per common
share) for the year ended December 31,
2021.
During 2022, the Company did not recognize any Canada Emergency Wage Subsidy program payments
as compared with $16.0 million
recognized in 2021.
During the fourth quarter of 2022, the Company sold 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 was satisfied through the
issuance of 7,017,988 common shares of Cathedral. As part of the
transaction, Cathedral and the Company have entered into a
marketing and technology alliance which will further help support
and expand the customer base of both companies in the Canadian
market.
The Company's operating days were higher in 2022, as compared
with 2021, as a result of supportive industry conditions driving
activity improvements year-over-year.
The 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-economic outlook over the short-term.
However, despite a potential economic slowdown in select major
economies, demand for crude oil continues to improve
year-over-year. Furthermore, OPEC+ nations continue to moderate
supply and respond to market conditions. Moderate crude oil 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 remains uncertainty regarding the
impacts of ongoing hostilities in Ukraine on the global economy and overall
economic health and recessionary pressures in certain operating
environments. Furthermore, there are several other factors that may
impact the demand for crude oil and natural gas, commodity prices,
and the demand for oilfield services.
The Company exited 2022 with a working capital deficit of
$707.8 million, compared with a
working capital surplus of $104.2
million as of December 31, 2021. The change in working
capital year-over-year was largely due to its $900.0 million revolving credit facility (the
"Credit Facility") being classified as current. The Company
has a history with successfully negotiating contractual terms and
extending the maturity of the Credit Facility. The Company's
available liquidity consisting of cash and available borrowings
under its Credit Facility totaled $67.2 million as of December 31, 2022,
compared to $15.8 million at
December 31, 2021. The available
liquidity increased by $51.4 million
primarily due to the increase in operating activity and increasing
funds flow from operations.
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
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Revenue
|
467,980
|
|
296,166
|
|
58
|
|
1,577,329
|
|
995,594
|
|
58
|
Adjusted EBITDA
1
|
129,963
|
|
57,861
|
|
nm
|
|
373,618
|
|
213,173
|
|
75
|
Adjusted EBITDA per
common share 1
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
0.76
|
|
$
0.35
|
|
nm
|
|
$
2.13
|
|
$
1.31
|
|
63
|
Diluted
|
$
0.76
|
|
$
0.36
|
|
nm
|
|
$
2.12
|
|
$
1.31
|
|
62
|
Net (loss) income
attributable to common shareholders
|
11,897
|
|
(29,235)
|
|
nm
|
|
8,128
|
|
(159,475)
|
|
nm
|
Net (loss) income
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
0.07
|
|
$
(0.18)
|
|
nm
|
|
$
0.05
|
|
$
(0.98)
|
|
nm
|
Diluted
|
$
0.07
|
|
$
(0.18)
|
|
nm
|
|
$
0.05
|
|
$
(0.98)
|
|
nm
|
Cash provided by
operating activities
|
121,497
|
|
39,221
|
|
nm
|
|
319,962
|
|
178,642
|
|
79
|
Funds flow from
operations
|
110,361
|
|
46,644
|
|
nm
|
|
371,956
|
|
190,695
|
|
95
|
Funds flow from
operations per common share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
0.65
|
|
$
0.28
|
|
nm
|
|
$
2.12
|
|
$
1.17
|
|
81
|
Diluted
|
$
0.65
|
|
$
0.29
|
|
nm
|
|
$
2.11
|
|
$
1.17
|
|
80
|
Long-term debt, net of
cash 2
|
507,009
|
|
1,440,579
|
|
(65)
|
|
507,009
|
|
1,440,579
|
|
(65)
|
Weighted average common
shares - basic (000s)
|
183,574
|
|
162,385
|
|
13
|
|
175,578
|
|
162,541
|
|
8
|
Weighted average common
shares - diluted (000s)
|
184,652
|
|
163,454
|
|
13
|
|
176,430
|
|
163,195
|
|
8
|
Drilling
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Number of marketed
rigs 3
|
|
|
|
|
|
|
|
|
|
|
|
Canada
4
|
123
|
|
127
|
|
(3)
|
|
123
|
|
127
|
|
(3)
|
United
States
|
89
|
|
93
|
|
(4)
|
|
89
|
|
93
|
|
(4)
|
International
5
|
34
|
|
42
|
|
(19)
|
|
34
|
|
42
|
|
(19)
|
Total
|
246
|
|
262
|
|
(6)
|
|
246
|
|
262
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating days
6
|
|
|
|
|
|
|
|
|
|
|
|
Canada
4
|
3,483
|
|
3,229
|
|
8
|
|
13,589
|
|
8,979
|
|
51
|
United
States
|
5,026
|
|
3,688
|
|
36
|
|
17,928
|
|
12,242
|
|
46
|
International
5
|
1,074
|
|
942
|
|
14
|
|
3,973
|
|
3,574
|
|
11
|
Total
|
9,583
|
|
7,859
|
|
22
|
|
35,490
|
|
24,795
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
Well
Servicing
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Number of
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
47
|
|
52
|
|
(10)
|
|
47
|
|
52
|
|
(10)
|
United
States
|
47
|
|
48
|
|
(2)
|
|
47
|
|
48
|
|
(2)
|
Total
|
94
|
|
100
|
|
(6)
|
|
94
|
|
100
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
hours
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
11,053
|
|
9,821
|
|
13
|
|
47,269
|
|
36,254
|
|
30
|
United
States
|
30,744
|
|
29,419
|
|
5
|
|
124,035
|
|
124,916
|
|
(1)
|
Total
|
41,797
|
|
39,240
|
|
7
|
|
171,304
|
|
161,170
|
|
6
|
nm - calculation not
meaningful
|
1.
Refer to Adjusted EBITDA calculation in Non-GAAP
Measures.
|
2.
Change in long-term debt, net of cash was largely due to its
$900.0 million revolving credit facility being classified as
current.
|
3.
Total rigs: Canada - 131, United States - 117, International -
43 (2021: Canada - 137, United States - 127, International -
48).
|
4.
Excludes coring rigs.
|
5.
Includes workover rigs
|
6.
Defined as contract drilling days, between spud to rig
release.
|
FINANCIAL POSITION AND CAPITAL EXPENDITURES HIGHLIGHTS
As at ($
thousands)
|
2022
|
|
|
2021
|
|
|
2020
|
Working capital
(deficit)1, 2
|
(707,800)
|
|
|
104,228
|
|
|
103,036
|
Cash
|
49,880
|
|
|
13,305
|
|
|
44,198
|
Long-term
debt
|
556,889
|
|
|
1,453,884
|
|
|
1,384,605
|
Long-term debt, net of
cash
|
507,009
|
|
|
1,440,579
|
|
|
1,340,407
|
Total long-term
financial liabilities
|
562,837
|
|
|
1,458,211
|
|
|
1,390,647
|
Total assets
|
3,183,904
|
|
|
2,977,054
|
|
|
3,054,493
|
Long-term debt to long
term-debt plus shareholder's equity ratio
|
0.30
|
|
|
0.55
|
|
|
0.50
|
1 See
Non-GAAP Measures section.
|
2
Change in working capital (deficit), was largely due to its $900.0
million revolving credit facility being classified as
current.
|
|
Three months ended
December 31
|
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
% change
|
|
|
2022
|
|
|
2021
|
|
|
% change
|
Capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upgrade/growth
|
13,748
|
|
|
3,395
|
|
|
nm
|
|
|
68,763
|
|
|
20,492
|
|
|
nm
|
Maintenance
|
27,491
|
|
|
19,518
|
|
|
41
|
|
|
105,630
|
|
|
44,760
|
|
|
nm
|
Proceeds
from disposals of property and equipment
|
(608)
|
|
|
(2,581)
|
|
|
(76)
|
|
|
(47,544)
|
|
|
(7,228)
|
|
|
nm
|
Net capital
expenditures before acquisitions
|
40,631
|
|
|
20,332
|
|
|
nm
|
|
|
126,849
|
|
|
58,024
|
|
|
nm
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117,928
|
|
|
nm
|
Net capital
expenditures
|
40,631
|
|
|
20,332
|
|
|
nm
|
|
|
126,849
|
|
|
175,952
|
|
|
(28)
|
nm - calculation not
meaningful
|
REVENUE AND OILFIELD SERVICES EXPENSE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
121,668
|
|
90,243
|
|
35
|
|
434,982
|
|
249,679
|
|
74
|
United
States
|
274,324
|
|
152,361
|
|
80
|
|
892,086
|
|
538,896
|
|
66
|
International
|
71,988
|
|
53,562
|
|
34
|
|
250,261
|
|
207,019
|
|
21
|
Total
revenue
|
467,980
|
|
296,166
|
|
58
|
|
1,577,329
|
|
995,594
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
Oilfield services
expense
|
325,247
|
|
228,146
|
|
43
|
|
1,155,083
|
|
744,195
|
|
55
|
Revenue for the year ended December 31,
2022 totaled $1,577.3 million,
a 58 percent increase from the year ended December 31, 2021 revenue of $995.6 million. The increase in total revenue
during the year ended December 31,
2022 was primarily due to favourable industry conditions and
supportive oil and natural gas commodity prices, increasing demand
for oilfield services. A positive foreign exchange translation
impact further contributed to the increase in revenue reported in
Canadian currency. In addition, operational activity increased as a
result of the Company's timing of the acquisition of 35 land-based
drilling rigs in Canada during the
third quarter of 2021. The Company recorded revenue of $468.0
million for the three months ended December 31, 2022, a
58 percent increase from the $296.2 million recorded in the
three months ended December 31, 2021.
CANADIAN OILFIELD SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Marketed drilling
rigs1,2
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
123
|
|
127
|
|
|
|
127
|
|
101
|
|
|
Acquisition
|
—
|
|
—
|
|
|
|
—
|
|
35
|
|
|
Placed into
reserve
|
—
|
|
—
|
|
|
|
(4)
|
|
(9)
|
|
|
Ending
balance
|
123
|
|
127
|
|
(3)
|
|
123
|
|
127
|
|
(3)
|
Drilling operating
days3
|
3,483
|
|
3,229
|
|
8
|
|
13,589
|
|
8,979
|
|
51
|
Drilling rig
utilization (%)1
|
27.6
|
|
22.9
|
|
21
|
|
27.1
|
|
18.5
|
|
46
|
Well servicing
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
52
|
|
52
|
|
|
|
52
|
|
52
|
|
|
Decommissions
|
(5)
|
|
—
|
|
|
|
(5)
|
|
—
|
|
|
Ending
balance
|
47
|
|
52
|
|
(10)
|
|
47
|
|
52
|
|
(10)
|
Well servicing
operating hours
|
11,053
|
|
9,821
|
|
13
|
|
47,269
|
|
36,254
|
|
30
|
Well servicing
utilization (%)
|
23.1
|
|
20.5
|
|
13
|
|
24.9
|
|
19.1
|
|
30
|
1 Excludes
coring rig fleet.
|
2 Total
rigs: 131, (2021 - 137).
|
3 Defined as
contract drilling days, between spud to rig
release.
|
The Company recorded revenue of $435.0
million in Canada for the
year ended December 31, 2022, an
increase of 74 percent from $249.7
million recorded for the year ended December 31, 2021. Revenue generated in
Canada increased by 35 percent to
$121.7 million for the three months
ended December 31, 2022, from
$90.2 million for the three months
ended December 31, 2021. For
the year ended December 31, 2022,
total revenue generated from the Company's Canadian operations was
28 percent of the Company's total revenue compared with 25 percent
in the prior year. In the fourth quarter of 2022, Canadian revenues
accounted for 26 percent of the total revenue compared with 31
percent in 2021.
For the year ended December 31, 2022, the Company recorded
13,589 drilling operating days in Canada, an increase of 51 percent as
compared with 8,979 drilling operating days for the year ended
December 31, 2021. During the fourth quarter of 2022 the
Company recorded 3,483 operating days in Canada, an increase of eight percent from
3,229 operating days recorded during the fourth quarter of the
prior year. Well servicing hours increased by 30 percent to 47,269
operating hours compared with 36,254 operating hours for the year
ended December 31, 2021. Well servicing hours in the fourth
quarter of 2022 were up 13 percent to 11,053 compared to the 9,821
hours in the fourth quarter of the prior year.
The operating and financial results for the Company's Canadian
operations during 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 financial results was the elimination of the Canada Emergency Wage Subsidy ("CEWS")
program in 2021 by the Government of Canada, from which $16.0 million were received by the Company during
2021.
During 2022, the Company moved four under-utilized drilling rigs
into its Canadian reserve fleet and decommissioned six non-marketed
drilling rigs and five well servicing rigs.
UNITED STATES OILFIELD
SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Marketed drilling
rigs1
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
89
|
|
93
|
|
|
|
93
|
|
122
|
|
|
Disposal
|
—
|
|
—
|
|
|
|
(1)
|
|
—
|
|
|
Placed into
reserve
|
—
|
|
—
|
|
|
|
(3)
|
|
(29)
|
|
|
Ending
balance
|
89
|
|
93
|
|
(4)
|
|
89
|
|
93
|
|
(4)
|
Drilling operating
days2
|
5,026
|
|
3,688
|
|
36
|
|
17,928
|
|
12,242
|
|
46
|
Drilling rig
utilization (%)
|
43.0
|
|
29.4
|
|
46
|
|
38.7
|
|
24.7
|
|
57
|
Well servicing
rigs
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
48
|
|
48
|
|
|
|
48
|
|
47
|
|
|
Additions
|
—
|
|
—
|
|
|
|
—
|
|
1
|
|
|
Decommissions
|
(1)
|
|
—
|
|
|
|
(1)
|
|
—
|
|
|
Ending
balance
|
47
|
|
48
|
|
(2)
|
|
47
|
|
48
|
|
(2)
|
Well servicing
operating hours
|
30,744
|
|
29,419
|
|
5
|
|
124,035
|
|
124,916
|
|
(1)
|
Well servicing
utilization (%)
|
69.6
|
|
66.6
|
|
5
|
|
70.8
|
|
71.7
|
|
(1)
|
1Total rigs:
117, (2021 - 127).
|
2 Defined as
contract drilling days, between spud to rig
release.
|
|
For the year ended December 31,
2022, revenue of $892.1
million was recorded in the United
States, an increase of 66 percent from the $538.9 million recorded in the prior year.
Revenues recorded in the United
States were $274.3 million in
the fourth quarter of 2022, an 80 percent increase from the
$152.4 million recorded in the
corresponding period of the prior year. The Company's United States operations accounted for 56
percent of the Company's total revenue in the 2022 fiscal year
(2021 - 54 percent) and was the largest contributor to the
Company's total revenue in 2022, consistent with the prior year.
During the fourth quarter of 2022, United States operations accounted for 59
percent of the Company's revenue (2021 - 51 percent), 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 46 percent from 12,242 drilling
operating days in 2021 to 17,928 operating days in 2022. For the
year ended December 31, 2022, well servicing activity
decreased one percent from 124,916 operating hours in 2021 to
124,035 operating hours in 2022. During the fourth quarter drilling
operating days increased by 36 percent from 3,688 operating days in
2021 to 5,026 operating days in 2022. For the fourth quarter ended
December 31, 2022, well servicing activity increased five
percent from 29,419 operating hours in 2021 to 30,744 operating
hours.
Overall operating and financial results for the Company's
United States operations reflected
improved industry conditions, increased 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 year ended December 31, 2022.
During 2022, the Company sold one cold stacked drilling rig from
its United States operations,
transferred three under-utilized drilling rigs into its
United States reserve fleet and
decommissioned nine non-marketed drilling rigs and one well
servicing rig.
INTERNATIONAL OILFIELD SERVICES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Marketed drilling and
workover rigs1
|
|
|
|
|
|
|
|
|
|
|
|
Opening
balance
|
34
|
|
42
|
|
|
|
42
|
|
48
|
|
|
Disposal
|
—
|
|
—
|
|
|
|
(2)
|
|
—
|
|
|
Placed into
reserve
|
—
|
|
—
|
|
|
|
(6)
|
|
(6)
|
|
|
Ending
balance
|
34
|
|
42
|
|
(19)
|
|
34
|
|
42
|
|
(19)
|
Drilling operating
days2
|
1,074
|
|
942
|
|
14
|
|
3,973
|
|
3,574
|
|
11
|
Drilling rig
utilization (%)
|
25.4
|
|
20.1
|
|
26
|
|
23.7
|
|
19.3
|
|
23
|
1 Total
rigs: 43, (2021 - 48).
|
2 Defined as
contract drilling days, between spud to rig release.
|
The Company's international revenues for the year ended
December 31, 2022 increased 21
percent to $250.3 million from
$207.0 million recorded in the year
ended December 31, 2021.
International revenue totaled $72.0
million in the fourth quarter of 2022, a 34 percent increase
from $53.6 million recorded in the
corresponding period of the prior year. The Company's international
operations accounted for 16 percent of the Company's total revenue
in 2022 (2021 - 21 percent). The Company's international
operations contributed 15 percent of the Company's fourth quarter
revenue in 2022 (2021 - 18 percent).
International drilling operating days totaled 3,973 in 2022
compared with 3,574 drilling operating days for the prior year, an
increase of 11 percent. International operating days for the
three months ended December 31, 2022 increased 14 percent to
1,074 compared to 942 operating days in the fourth quarter of
2021.
Operating and financial results from the international
operations reflected a steady and incrementally positive operating
environment as COVID-19 related disruptions continued to dissipate.
The financial results from the Company's international operations
were further positively impacted on the currency translation, as
the United States dollar
strengthened relative to the Canadian dollar for the year ended
December 31, 2022.
During 2022, the Company sold two cold-stacked drilling
rigs located in Mexico for US
$34.0 million, transferred six
under-utilized drilling rigs into its international operations
reserve fleet, and decommissioned three non-marketed drilling
rigs.
DEPRECIATION
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Depreciation
|
73,032
|
|
74,194
|
|
(2)
|
|
281,137
|
|
288,188
|
|
(2)
|
Depreciation expense for the year decreased by two percent to
$281.1 million compared with
$288.2 million for the year ended
2021. Depreciation expense totaled $73.0
million for the fourth quarter of 2022 compared with
$74.2 million for the fourth quarter
of 2021, a decrease of two percent. The decrease in depreciation is
due to certain operating assets having become fully depreciated in
which case no further depreciation expense will be incurred on such
assets. Offsetting the decrease to the depreciation expense are
additional capital expenditures contributing to an increased asset
base in addition to the negative impact of the foreign exchange
translation on converting USD denominated depreciation expenses.
GENERAL AND ADMINISTRATIVE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
General and
administrative
|
12,770
|
|
10,159
|
|
26
|
|
48,628
|
|
38,226
|
|
27
|
% of revenue
|
2.7
|
|
3.4
|
|
|
|
3.1
|
|
3.8
|
|
|
For the year ended December 31,
2022, general and administrative expense totaled
$48.6 million (3.1 percent of
revenue) compared with $38.2 million
(3.8 percent of revenue) for the year ended December 31, 2021, an increase of 27 percent.
General and administrative expense increased 26 percent to
$12.8 million (2.7 percent of
revenue) for the fourth quarter of 2022. General and administrative
expense on a per operating day basis decreased by nine percent for
the year ended December 31, 2022,
compared to the prior year. On an overall basis, the general and
administrative expense increased in support of increased
operational activity, the end of funding from the CEWS program
(2021 - $2.1 million), the full
reinstatement of salary rollbacks and annual wage increases.
Further increasing the general and administrative expense was the
negative foreign exchange translation on converting USD denominated
general and administrative expenses.
FOREIGN EXCHANGE AND OTHER (GAIN) LOSS
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Foreign exchange and
other (gain) loss
|
(9,612)
|
|
(208)
|
|
nm
|
|
(19,587)
|
|
11,102
|
|
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.
LOSS (GAIN) ON ASSET SALE
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Loss (gain) on asset
sale
|
2,451
|
|
(3,596)
|
|
nm
|
|
(29,347)
|
|
(3,596)
|
|
nm
|
nm - calculation not
meaningful
|
During the first quarter of 2022, the Company sold 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
$29.9 million.
INTEREST EXPENSE
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Interest
expense
|
34,092
|
|
25,027
|
|
36
|
|
119,277
|
|
97,596
|
|
22
|
Interest expenses were incurred on the Company's Credit
Facility, the United States dollar
denominated unsecured Senior Notes (the "Senior Notes"),
$37.0 million of subordinate
convertible debentures (the "Convertible Debentures")
prior to conversion, capital lease and other obligations.
Interest expense increased by 22 percent for the year ended
December 31, 2022, compared with the
same period in 2021. The increase is the result of higher overall
borrowing and higher interest rates. The negative translational
impact on USD denominated debt further increased interest expense
for the year ended December 31, 2022.
The Company is exposed to a floating interest rate on the Credit
Facility and this rate has increased year over year. For the three
months ended December 31, 2022,
interest expense increased 36 percent to $34.1 million compared with the fourth quarter of
2021 due to the same reasons discussed above.
INCOME TAX (RECOVERY)
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Current income
tax
|
2,439
|
|
296
|
|
nm
|
|
995
|
|
989
|
|
1
|
Deferred income tax
(recovery)
|
1,720
|
|
(11,693)
|
|
nm
|
|
(15,854)
|
|
(39,443)
|
|
(60)
|
Total income tax
(recovery)
|
4,159
|
|
(11,397)
|
|
nm
|
|
(14,859)
|
|
(38,454)
|
|
(61)
|
Effective income tax
rate (%)
|
25.8
|
|
28.1
|
|
|
|
233.2
|
|
19.8
|
|
|
nm - calculation not
meaningful
|
The effective income tax rate for the year ended December 31, 2022 was 233.2 percent compared with
19.8 percent for the year ended December 31,
2021. The effective tax rate was impacted by operating
earnings and gains 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
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Cash provided by
operating activities
|
121,497
|
|
39,221
|
|
nm
|
|
319,962
|
|
178,642
|
|
79
|
Funds flow from
operations
|
110,361
|
|
46,644
|
|
nm
|
|
371,956
|
|
190,695
|
|
95
|
Funds flow from
operations per common share
|
$
0.65
|
|
$
0.28
|
|
nm
|
|
$
2.12
|
|
$
1.17
|
|
81
|
Working
capital
|
(707,800)
|
|
104,228
|
|
nm
|
|
(707,800)
|
|
104,228
|
|
nm
|
nm - calculation not
meaningful
|
For the year ended December 31,
2022, the Company generated funds flow from operations of
$372.0 million ($2.12 per common share) an increase of 95 percent
from $190.7 million ($1.17 per common share) for the year ended
December 31, 2021. The Company
generated funds flow from operations of $110.4 million ($0.65 per common share) in the three months ended
December 31, 2022, compared with
$46.6 million ($0.28 per common share) for the three months
ended December 31, 2021. The increase
in funds flow from operations in 2022 compared with 2021 is largely
due to the increase in activity compared with the prior period as a
result of the oil and natural gas industry's improving operating
environment.
As of December 31, 2022, the Company's working capital
was a deficit of $707.8 million,
compared with a working capital surplus of $104.2 million as of December 31, 2021.
The change in working capital year-over-year was largely due to its
Credit Facility being classified as current. The Company's Credit
Facility provides for total borrowings of $900.0 million of which $17.3 million was undrawn and available at
December 31, 2022.
INVESTING ACTIVITIES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
—
|
|
—
|
|
—
|
|
—
|
|
(117,928)
|
|
nm
|
Purchase of property
and equipment
|
(41,239)
|
|
(22,913)
|
|
80
|
|
(174,393)
|
|
(65,252)
|
|
nm
|
Proceeds from disposals
of property and equipment
|
608
|
|
2,581
|
|
(76)
|
|
47,544
|
|
7,228
|
|
nm
|
Distribution to
non-controlling interest
|
—
|
|
—
|
|
nm
|
|
(1,852)
|
|
—
|
|
nm
|
Net change in non-cash
working capital
|
(8,717)
|
|
(755)
|
|
nm
|
|
7,244
|
|
1,366
|
|
nm
|
Cash used in investing
activities
|
(49,348)
|
|
(21,087)
|
|
nm
|
|
(121,457)
|
|
(174,586)
|
|
(30)
|
nm - calculation not
meaningful
|
Net purchases of property and equipment during the fiscal year
ending 2022 totaled $126.8 million
(2021 - $58.0 million) and net
purchases of property and equipment totaled $40.6 million for the fourth quarter (2021 -
$20.3 million). The purchase of
property and equipment relates primarily to $105.6 million in maintenance capital and
$68.8 million in upgrade capital
(2021 - $44.8 million and
$20.5 million, respectively).
FINANCING ACTIVITIES
|
Three months ended
December 31
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
2021
|
|
% change
|
|
2022
|
|
2021
|
|
% change
|
Proceeds from long-term
debt
|
19,968
|
|
13,143
|
|
52
|
|
71,158
|
|
162,269
|
|
(56)
|
Repayments of long-term
debt
|
(18,068)
|
|
(4,789)
|
|
nm
|
|
(101,080)
|
|
(89,532)
|
|
13
|
Lease obligation
principal repayments
|
(6,190)
|
|
(1,713)
|
|
nm
|
|
(12,263)
|
|
(6,845)
|
|
79
|
Interest
paid
|
(47,774)
|
|
(38,594)
|
|
24
|
|
(118,110)
|
|
(99,751)
|
|
18
|
Purchase of common
shares held in trust
|
(623)
|
|
(379)
|
|
64
|
|
(1,750)
|
|
(1,173)
|
|
49
|
Cash used in financing
activities
|
(52,687)
|
|
(32,332)
|
|
63
|
|
(162,045)
|
|
(35,032)
|
|
nm
|
nm - calculation not
meaningful
|
As at December 31, 2022, the
amount of available borrowings under the Credit Facility was
$17.3 million. In addition, the
Company has available a US $50.0
million secured letter of credit facility, of which US
$3.6 million was available as of
December 31, 2022.
During the fourth quarter of 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 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' election to convert the
Convertible Debentures were made following the issue of notice by
the Company.
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, terminating
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 date.
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, provided that additional Senior
Notes may be repurchased for redemption in excess of the
$25.0 million limit if certain
criteria are met.
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,
2022:
|
Covenant
|
|
|
December 31,
2022
|
The Credit
Facility
|
|
|
|
|
Consolidated
EBITDA1
|
> $140.0
million
|
|
|
$
373,618
|
Consolidated EBITDA to
Consolidated Interest Expense1,2
|
≥ 2.50
|
|
|
3.22
|
Consolidated Senior
Debt to Consolidated EBITDA1,3
|
≤ 3.00
|
|
|
2.23
|
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, 2022 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, 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 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,
2022, the Company:
- sold one cold-stacked drilling rig from the United States fleet and two cold-stacked
drilling rigs from its international fleet,
- moved four under-utilized drilling rigs to its Canadian reserve
fleet, three under-utilized drilling rigs to its United States reserve fleet, and six
under-utilized drilling rigs to its international reserve
fleet,
- decommissioned six non-marketed rigs in its Canadian, fleet,
nine non-marketed rigs in its United
States fleet, and three non-marketed in its international
fleet, and;
- decommissioned five well-servicing rigs in its Canadian fleet
and one well-servicing rig in its United Sates fleet.
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 positive with
steady demand for services and tightening rig supply. Recessionary
pressures for many global economies and continued inflationary
concerns continue to add uncertainty to the outlook for the oil and
natural gas industry. However, despite a potential economic
slowdown in major economies, demand for crude oil is expected to
improve year-over-year. Furthermore, OPEC nations continue to
moderate supply and respond to market demands. As a result, global
commodity prices have relatively steadied over the past three
months, with the benchmark price of West Texas Intermediate
("WTI") averaging US $84/bbl
in November 2022, $76/bbl in December
2022, and modestly increasing to average US $78/bbl in January
2023.
The Company expects crude oil demand to remain relatively steady
and anticipates that moderated oil supply in a positive commodity
price environment will continue to support steady oilfield services
activity and positive revenue rates over the course of the 2023
year. The Company continues to expect North American oil and
natural gas producers to remain committed to prioritizing
shareholder returns. However, the Company also expect producers
maintain and grow production in consideration of well productivity
declines and low drilled but uncompleted ("DUC") well
inventory.
Over the short-term, there remains uncertainty regarding
macro-economic conditions that may impact supply, demand, 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.
The Company remains committed to disciplined capital allocation
and debt retirement. The Company has budgeted base capital
expenditures for 2023 of approximately $157.0 million, related to maintenance
expenditures and selective growth projects. The Company may
consider further upgrade or grow projects in response to customer
demand and appropriate contract terms. As at January 1, 2023, the Company moved nine, four,
and two under-utilized drilling rigs to its Canadian, United States, and international reserve
fleets, respectively.
Canadian Activity
Canadian activity, representing 28 percent of total revenue in
2022, remained steady over the fourth quarter due to supportive
industry conditions and winter drilling conditions. The Company
expects activity to remain stable in the first quarter of 2023 as
operations continue through the winter drilling season.
Furthermore, the recently announced industrial development
agreement between the Government of British Columbia and Blueberry River First
Nations is constructive for Canadian oil and natural gas activity
and is expected to increase demand for drilling services in the
respective region.
As of March 2, 2023, of our 114
marketed Canadian drilling rigs, approximately 48 percent are
engaged under term contracts of various durations. Approximately 40
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 56 percent of total revenue in 2022, improved over the
fourth quarter of 2022 due to supportive industry conditions and is
expected to remain steady throughout the first quarter of 2023.
Year over year, the Company expects activity improvements in
the United States with improving
revenue rates as contracts turnover and customers look to secure
ready available equipment.
As of March 2, 2023, of our 86
marketed United States drilling
rigs, approximately 74 percent are engaged under term contracts of
various durations. Approximately 24 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 16 percent of total revenue
in 2022, improved over the fourth quarter of 2022 with two drilling
rigs in Oman commencing drilling
programs. International activity is expected to remain steady over
the first quarter of 2023 and improve in the second quarter of 2023
with a third drilling rig in Oman
expected to activate and commence drilling. The Company expects
activity of the two drilling rigs active in Bahrain and the two drilling rigs active in
Kuwait to remain steady. By
mid-2023, the Company expects seven of the eight marketed drilling
rigs in the Middle East will be
active and operating on long-term contracts. Operations in
Australia are expected to remain
steady over the first quarter of 2023 and incrementally improve
over the course of the 2023 year. Operations in Argentina, with two drilling rigs active, are
also expected remain steady in the first quarter of 2023.
As of March 2, 2023, of our 32
marketed international drilling rigs, approximately 50 percent are
engaged under term contracts of various durations. Approximately 75
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 economic
and market conditions, crude oil and natural gas prices, political
events including the ongoing hostilities between Ukraine and the Russian Federation, foreign currency
fluctuations, weather conditions, the Company's defense of lawsuits
and other claims, and the ability of oil and natural gas companies
to pay accounts receivable balances and raise capital or other
unforeseen conditions which could ongoing impact on the use of the
services supplied by the Company. For a more detailed description
of the risk factors and uncertainties that face the Company and the
industry in which it operates, refer to the "Risks and
Uncertainties" section of our current Management's Discussion &
Analysis and the section titled "Risk Factors" in our current
Annual Information Form.
CONFERENCE CALL
A conference call will be held to discuss the Company's fourth
quarter 2022 results at 10:00 a.m.
MST (12:00 p.m. EST) on
Friday, March 3, 2023. The conference
call number is 1-416-764-8659 (in Toronto) or 1-888-664-6392 (outside
Toronto). The conference call
reservation number is: 64701752. A recording will be available
until March 10, 2023 by dialing
1-416-764-8677 (in Toronto) or
1-888-390-0541 (outside Toronto)
and entering the reservation number 701752#. 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
2022
|
|
December 31
2021
|
(Unaudited - in
thousands of Canadian dollars)
|
|
|
|
|
Assets
|
|
|
|
|
Current
Assets
|
|
|
|
|
Cash
|
|
$
49,880
|
|
$
13,305
|
Accounts
receivable
|
|
359,933
|
|
226,807
|
Inventories, prepaid,
investments and other
|
|
60,758
|
|
49,172
|
Income taxes
receivable
|
|
40
|
|
580
|
Total current
assets
|
|
470,611
|
|
289,864
|
|
|
|
|
|
Property and
equipment
|
|
2,516,923
|
|
2,512,953
|
Deferred income
taxes
|
|
196,370
|
|
174,237
|
Total assets
|
|
$
3,183,904
|
|
$ 2,977,054
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accounts payable and
accruals
|
|
$
268,243
|
|
$
177,932
|
Share-based
compensation
|
|
11,735
|
|
1,055
|
Income taxes
payable
|
|
4,423
|
|
1,389
|
Current portion of
lease obligations
|
|
11,324
|
|
5,260
|
Current portion of
long-term debt
|
|
882,686
|
|
—
|
Total current
liabilities
|
|
1,178,411
|
|
185,636
|
|
|
|
|
|
Lease
obligations
|
|
5,948
|
|
4,327
|
Long-term
debt
|
|
556,889
|
|
1,453,884
|
Share-based
compensation
|
|
13,635
|
|
7,966
|
Income taxes
payable
|
|
5,394
|
|
7,647
|
Deferred income
taxes
|
|
134,857
|
|
120,100
|
Non-controlling
interest
|
|
—
|
|
4,832
|
Total
liabilities
|
|
1,895,134
|
|
1,784,392
|
|
|
|
|
|
Shareholders'
Equity
|
|
|
|
|
Shareholder's
capital
|
|
267,790
|
|
230,376
|
Contributed
surplus
|
|
23,398
|
|
23,197
|
Equity component of
subordinate convertible debenture
|
|
—
|
|
2,380
|
Accumulated other
comprehensive income
|
|
276,053
|
|
223,308
|
Retained
earnings
|
|
721,529
|
|
713,401
|
Total shareholders'
equity
|
|
1,288,770
|
|
1,192,662
|
Total liabilities and
shareholders' equity
|
|
$
3,183,904
|
|
$ 2,977,054
|
Ensign Energy Services Inc.
Consolidated Statements
of Income (Loss)
|
|
Three months
ended
|
|
Twelve months
ended
|
|
|
December 31
2022
|
|
December 31
2021
|
|
December 31
2022
|
|
December 31
2021
|
(Unaudited - in
thousands of Canadian dollars, except per share
data)
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
467,980
|
|
$
296,166
|
|
$
1,577,329
|
|
$
995,594
|
Expenses
|
|
|
|
|
|
|
|
|
Oilfield
services
|
|
325,247
|
|
228,146
|
|
1,155,083
|
|
744,195
|
Depreciation
|
|
73,032
|
|
74,194
|
|
281,137
|
|
288,188
|
General and
administrative
|
|
12,770
|
|
10,159
|
|
48,628
|
|
38,226
|
Restructuring
|
|
—
|
|
350
|
|
—
|
|
4,580
|
Share-based
compensation
|
|
11,662
|
|
(5)
|
|
19,711
|
|
6,377
|
Foreign exchange and
other (gain) loss
|
(9,612)
|
|
(208)
|
|
(19,587)
|
|
11,102
|
Total
expenses
|
|
413,099
|
|
312,636
|
|
1,484,972
|
|
1,092,668
|
Income (loss) before
interest expense, accretion of deferred financing charges, other
losses (gains) and income taxes
|
|
54,881
|
|
(16,470)
|
|
92,357
|
|
(97,074)
|
Loss (gain) on asset
sale
|
|
2,451
|
|
(3,596)
|
|
(29,347)
|
|
(3,596)
|
Gain on repurchase of
unsecured Senior Notes
|
|
—
|
|
—
|
|
—
|
|
(7,431)
|
Interest
expense
|
|
34,092
|
|
25,027
|
|
119,277
|
|
97,596
|
Accretion of deferred
financing charges
|
|
2,199
|
|
2,710
|
|
8,800
|
|
10,819
|
Income (loss) before
income tax
|
|
16,139
|
|
(40,611)
|
|
(6,373)
|
|
(194,462)
|
Income tax
(recovery)
|
|
|
|
|
|
|
|
|
Current income
tax
|
|
2,439
|
|
296
|
|
995
|
|
989
|
Deferred income tax
(recovery)
|
|
1,720
|
|
(11,693)
|
|
(15,854)
|
|
(39,443)
|
Total income tax
(recovery)
|
|
4,159
|
|
(11,397)
|
|
(14,859)
|
|
(38,454)
|
Net income (loss)
from continued operations
|
|
11,980
|
|
(29,214)
|
|
8,486
|
|
(156,008)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued
operations
|
|
—
|
|
(30)
|
|
—
|
|
(3,452)
|
Net income
(loss)
|
|
11,980
|
|
(29,244)
|
|
8,486
|
|
(159,460)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to:
|
|
|
|
|
|
|
|
|
Common
shareholders
|
|
11,897
|
|
(29,235)
|
|
8,128
|
|
(159,475)
|
Non-controlling
interests
|
|
83
|
|
(9)
|
|
358
|
|
15
|
|
|
$
11,980
|
|
$
(29,244)
|
|
$
8,486
|
|
$
(159,460)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to common shareholders per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
0.07
|
|
$
(0.18)
|
|
$
0.05
|
|
$
(0.98)
|
Diluted
|
|
$
0.07
|
|
$
(0.18)
|
|
$
0.05
|
|
$
(0.98)
|
Ensign Energy Services Inc.
Consolidated Statements
of Cash Flows
|
|
Three months
ended
|
|
Twelve months
ended
|
(Unaudited - in
thousands of Canadian dollars)
|
|
December 31
2022
|
|
December 31
2021
|
|
December 31
2022
|
|
December 31
2021
|
Cash provided by
(used in)
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
11,980
|
|
$
(29,244)
|
|
$
8,486
|
|
$
(159,460)
|
Items not affecting
cash
|
|
|
|
|
|
|
|
|
Depreciation
|
|
73,032
|
|
74,194
|
|
281,137
|
|
288,188
|
Share-based
compensation, net of cash settlements
|
|
11,452
|
|
(5)
|
|
17,765
|
|
6,377
|
Loss (gain) in asset
sale
|
|
2,451
|
|
(3,596)
|
|
(29,347)
|
|
(3,596)
|
Gain on repurchase of
unsecured Senior Notes
|
|
—
|
|
—
|
|
—
|
|
(7,431)
|
Unrealized foreign
exchange and other gain
|
|
(26,565)
|
|
(10,749)
|
|
(18,308)
|
|
(2,355)
|
Accretion on deferred
financing charges
|
|
2,199
|
|
2,710
|
|
8,800
|
|
10,819
|
Interest
expense
|
|
34,092
|
|
25,027
|
|
119,277
|
|
97,596
|
Deferred income tax
recovery
|
|
1,720
|
|
(11,693)
|
|
(15,854)
|
|
(39,443)
|
Funds flow from
operations
|
|
110,361
|
|
46,644
|
|
371,956
|
|
190,695
|
Net change in non-cash
working capital
|
|
11,136
|
|
(7,423)
|
|
(51,994)
|
|
(12,053)
|
Cash provided by
operating activities
|
|
121,497
|
|
39,221
|
|
319,962
|
|
178,642
|
Investing
activities
|
|
|
|
|
|
|
|
|
Acquisition of 35
drilling rigs, related equipment, land and buildings
|
|
—
|
|
—
|
|
—
|
|
(117,928)
|
Purchase of property
and equipment
|
|
(41,239)
|
|
(22,913)
|
|
(174,393)
|
|
(65,252)
|
Proceeds from disposals
of property and equipment
|
|
608
|
|
2,581
|
|
47,544
|
|
7,228
|
Distribution to
non-controlling interest
|
|
—
|
|
—
|
|
(1,852)
|
|
—
|
Net change in non-cash
working capital
|
|
(8,717)
|
|
(755)
|
|
7,244
|
|
1,366
|
Cash used in
investing activities
|
|
(49,348)
|
|
(21,087)
|
|
(121,457)
|
|
(174,586)
|
Financing
activities
|
|
|
|
|
|
|
|
|
Proceeds from long-term
debt
|
|
19,968
|
|
13,143
|
|
71,158
|
|
162,269
|
Repayments of long-term
debt
|
|
(18,068)
|
|
(4,789)
|
|
(101,080)
|
|
(89,532)
|
Lease obligation
principal repayments
|
|
(6,190)
|
|
(1,713)
|
|
(12,263)
|
|
(6,845)
|
Interest
paid
|
|
(47,774)
|
|
(38,594)
|
|
(118,110)
|
|
(99,751)
|
Purchase of common
shares held in trust
|
|
(623)
|
|
(379)
|
|
(1,750)
|
|
(1,173)
|
Cash used in
financing activities
|
|
(52,687)
|
|
(32,332)
|
|
(162,045)
|
|
(35,032)
|
Net increase
(decrease) in cash
|
|
19,462
|
|
(14,198)
|
|
36,460
|
|
(30,976)
|
Effects of foreign
exchange on cash
|
|
424
|
|
3,177
|
|
115
|
|
83
|
Cash – beginning of
period
|
|
29,994
|
|
24,326
|
|
13,305
|
|
44,198
|
Cash – end of
period
|
|
$
49,880
|
|
$
13,305
|
|
$
49,880
|
|
$
13,305
|
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 and Adjusted EBITDA per common share are 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 items to relate to its core drilling and well
servicing business. Adjusted EBITDA is not intended to represent
net income (loss) as calculated in accordance with IFRS.
Adjusted EBITDA
|
Three months ended
December 31
|
|
|
Twelve months ended
December 31
|
($
thousands)
|
2022
|
|
|
2021
|
|
|
2022
|
|
|
2021
|
Income (loss) before
income taxes
|
16,139
|
|
|
(40,611)
|
|
|
(6,373)
|
|
|
(194,462)
|
Add-back/(deduct)
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
34,092
|
|
|
25,027
|
|
|
119,277
|
|
|
97,596
|
Accretion of deferred
financing charges
|
2,199
|
|
|
2,710
|
|
|
8,800
|
|
|
10,819
|
Depreciation
|
73,032
|
|
|
74,194
|
|
|
281,137
|
|
|
288,188
|
Share-based
compensation
|
11,662
|
|
|
(5)
|
|
|
19,711
|
|
|
6,377
|
Loss (gain) on asset
sale
|
2,451
|
|
|
(3,596)
|
|
|
(29,347)
|
|
|
(3,596)
|
Gain on repurchase of
unsecured Senior Notes
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,431)
|
Foreign exchange and
other (gain) loss
|
(9,612)
|
|
|
(208)
|
|
|
(19,587)
|
|
|
11,102
|
Restructuring
|
—
|
|
|
350
|
|
|
—
|
|
|
4,580
|
Adjusted
EBITDA
|
129,963
|
|
|
57,861
|
|
|
373,618
|
|
|
213,173
|
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 herein 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 herein, 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 2023, 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 herein
could also have material adverse effects on forward-looking
statements.
For additional information refer to the "Risks and
Uncertainties" section herein 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 herein could also
have material adverse effects on forward-looking statements.
The forward-looking statements contained herein 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.
For further
information:
Michael Gray, Chief Financial
Officer, (403) 262-1361
Nicole Romanow, Investor Relations, (403)
267-6234
SOURCE Ensign Energy Services Inc.