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Stampede Drilling Inc. Announces 2020 Third Quarter Results

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CALGARY, AB, Nov. 5, 2020 /CNW/ - Stampede Drilling Inc. ("Stampede" or the "Corporation") (TSXV: SDI) announces today its financial and operational results for the three and nine month periods ended September 30, 2020.

The following should be read in conjunction with the Corporation's unaudited condensed consolidated financial statements and the notes thereto for the three and nine month periods ended September 30, 2020 and related management's discussion and analysis, which are available on SEDAR at www.sedar.com.

All amounts or dollar figures are denominated in thousands of Canadian dollars except for per share amounts, number of drilling rigs, and operating days, or unless otherwise noted.

Estimates and forward-looking information are based on assumptions of future events and actual results may vary from these estimates. See "Forward-Looking Information" in this press release for additional details.

THIRD QUARTER 2020 OPERATIONAL OVERVIEW

During the three months ended September 30, 2020, the Corporation recorded an Adjusted EBITDA loss from continuing operations of $269, down $951 (132%) from Adjusted EBITDA of $682 from the prior year comparative period. Reduced global oil demand driven by the novel coronavirus ("COVID-19") health pandemic and the associated economic downturn continued to pressure crude and liquid prices which negatively impacted the Corporations customer's 2020 drilling programs.

In March 2020, the Corporation implemented key cost and discretionary spending plan adjustments. For the three month period ended September 30, 2020. Administrative expenses were down 46% as compared to the corresponding 2019 period. The decrease was achieved by the elimination of all discretionary spending, non-essential travel, and entertainment.

For the three months ended September 2020, salary and benefit expenses were down 68% as compared to the corresponding 2019 period. The decrease in employee expenses was related to the following:

  • 18% to 36% reduction to executive cash compensation,

  • Employee salary reductions, modified work schedules, job sharing and temporary layoffs

  • Elimination of cash compensation for the Board of Directors


Three months ended September 30,

(000's CAD $)

2020

2019

% Change

Administrative expenses

241

447

(46%)

Salaries and benefits

212

661

(68%)

Share-based payments

34

104

(67%)

Depreciation

102

72

42%

Total G&A

589

1,284

(54%)

nm - not meaningful




In addition, the Corporation qualified for the Canadian Federal Government's wage subsidy program during Q2 2020 which was used to reduce employee related salary expenses and help minimize reduction in headcount. For the three and nine month period ended September 30, 2020, the Corporation recorded $128 and $323 respectively against salary and benefits expense.

OUTLOOK

Reduced global oil demand driven by the novel coronavirus ("COVID-19") health pandemic and the associated economic downturn continues to pressure crude and liquid prices which has created considerable uncertainty to the short-term outlook on oil and gas commodity pricing. The Corporation anticipates an increase in drilling activity for the upcoming winter months. However, the forecasted activity will still remain below prior year levels as producers continue to protect their balance sheet in these uncertain times. The Corporation will continue to actively monitor and manage risks through periods of lower commodity pricing and industry activity. As at September 30, 2020, the Corporation was in compliance of all covenants related to the operating line facility.

FINANCIAL SUMMARY

THIRD QUARTER 2020 SUMMARY (Compared with the third quarter 2019)

  • Revenue from continuing operations of $714, down 88% from $5,910;

  • Gross margin from continuing operations of $184, down 90% from $1,790;

  • Adjusted EBITDA loss from continuing operations of ($269), decreased 139% from Adjusted EBITDA of $682;

  • Net loss from continuing operations of ($1,633), increased 132% from ($705)

NINE MONTHS ENDED SEPTEMBER 30, 2020 SUMMARY (Compared with the nine months ended September 30, 2019)

  • Revenue from continuing operations of $11,879, down 30% from $16,992;

  • Gross margin from continuing operations of $3,846 down 35% from 6,081;

  • Adjusted EBITDA from continuing operations of $1,898 down 38% from $3,059;

  • Net loss from continuing operations of ($2,376), increased 108% from ($1,143)


Three months ended

September 30,


Nine months ended
September 30,

(000's CAD $ except per share amounts)

2020

2019

%
Change


2020

2019

%
Change

Continuing operations








Revenue

714

5,910

(88%)


11,879

16,992

(30%)

Direct operating expenses

530

4,120

(87%)


8,033

10,911

(26%)

Gross margin (1)

184

1,790

(90%)


3,846

6,081

(37%)

Net income (loss) from continuing operations

(1,633)

(705)

132%


(2,376)

(1,143)

108%

Basic and diluted per share

(0.01)

(0.01)

0%


(0.02)

(0.01)

(100%)

Adjusted EBITDA (loss) (1)

(269)

682

(139%)


1,898

3,059

(38%)

Weighted average common shares outstanding

132,046

131,752

0%


132,046

131,786

0%

Weighted average diluted common shares outstanding

132,046

131,751

0%


132,046

131,786

0%

Combined operations (2)








Net income

(1,633)

(724)

126%


(2,376)

(91)

2,511%

Basic and diluted per share

(0.01)

(0.01)

0%


(0.02)

(0.01)

(100%)

Adjusted EBITDA (loss) (1)

(269)

682

(139%)


1,898

3,533

(46%)

Capital expenditures

2,802

3,060

(8%)


2,802

7,285

(62%)

nm - not meaningful





(1) Refer to "Non-GAAP Measures" for further information.





(2) Combined operations represent the aggregated results of both continuing and discontinued operations.


RESULTS OF CONTINUING OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020


Nine months ended September 30,

(000's CAD $ except operating days)

2020

2019(1)

% Change





Revenue

11,879

16,992

(30%)

Direct operating expenses

8,033

10,911

(26%)

Gross margin (2)

3,846

6,081

(37%)

Gross margin %

32%

36%

(11%)

Net income from continuing operations

(2,376)

(1,143)

108%

General and administrative expenses

2,448

3,689

(34%)

Adjusted EBITDA (2)

1,898

3,059

(38%)

Adjusted EBITDA as a % of revenue

16%

18%

(11%)

Drilling rig operating days

567

854

(34%)

Drilling rig revenue per day

20.9

19.9

5%

Drilling rig utilization

21%

36%

(42%)

CAODC industry average utilization(3)

16%

22%

(27%)

nm - not meaningful




(1) The comparative period has been restated to reflect discontinued operations as discussed in Note 4.

(2) Refer to "Non-GAAP measures" for further information.




  • Revenue for the nine months ended September 30, 2020 was $11,879, down $5,113 (30%) compared to $16,992 for the corresponding 2019 period. The decrease was as a result of decreased drilling activity related due to the continued economic slowdown and the corresponding negative impact on oil and gas commodity pricing.

  • The Corporation had a total of 567 operating days in the first nine months of 2020, a decrease of 287 operating days (34%) from the 854 operating days in the corresponding 2019 period. The drilling rig utilization for the first nine months of 2020 was 21%, as compared to the first nine months CAODC industry average utilization rate of 20% for 2020 due to the Corporations strong first quarter 2020 utilization rate of 58%.

  • As a result of the decreased 2020 operating days and corresponding revenue, Adjusted EBITDA for the nine months ended September 30, 2020 was $1,898, down $1,161 from the 2019 corresponding period.

  • Gross margin for the nine months ended September 30, 2020 was 32%, down 11% from 36% as compared to the corresponding 2019 period. The 2020 gross margin were negatively impacted by fixed costs in Q2 and Q3 2020 with minimal operating activity.

  • For the nine months ended September 30, 2020, general and administrative expenses were $2,448 down $1,241 (34%) from $3,689 as compared to the corresponding 2019 period. The 2020 decrease in general and administrative expenses was as a result of the Corporations cost cutting initiatives implemented in March 2020. Cost cutting initiatives included reduced headcount, salary roll backs and elimination of all discretionary spending.

  • For the nine month period ended September 30, 2020, the net loss from continuing operations was $2,376 up $1,233 (108%) from $1,143 as compared to the corresponding 2019 period. Net income from continuing operations were negatively impacted due to the minimal drilling activity since the end of Q1 2020. The loss from continuing operations was partially offset by the Corporation's cost cutting initiatives.

THIRD QUARTER RESULTS OF CONTINUING OPERATIONS


Three months ended
September 30,

(000's CAD $ except per day amounts)

2020

2019(1)

% Change





Drilling rig revenue

714

5,910

(88%)

Direct operating expenses

530

4,120

(87%)

Gross margin (2)

184

1,790

(90%)

Gross margin %

26%

30%

(13%)

Net income (loss) from continuing operations

(1,633)

(705)

132%

General and administrative expenses

589

1,284

(54%)

Adjusted EBITDA (2)

(269)

682

(139%)

Adjusted EBITDA as a % of revenue

(38%)

12%

(417%)

Drilling rig operating days

36

295

(88%)

Drilling rig revenue per day

20.0

20.0

(0%)

Drilling rig utilization

4%

32%

(88%)

CAODC industry average utilization(3)

9%

23%

(61%)

nm - not meaningful




(1) The comparative period has been restated to reflect discontinued operations as discussed in Note 4.


(2) Refer to "Non-GAAP measures" for further information.




  • Revenue for the three months ended September 30, 2020 was $714, down $5,196 (88%) compared to $5,910 for the corresponding 2019 period. The decrease was as a result of decreased drilling activity related due to the continued economic slowdown and the corresponding negative impact on oil and gas commodity pricing.

  • The Corporation had a total of 36 operating days for the three months ended September 30, 2020, a decrease of 259 operating days (88%) from the 295 operating days in the corresponding 2019 period. The drilling rig utilization for the three months ended September 30, 2020 was 4%, as compared to the CAODC industry average utilization rate of 9%. Low utilization for the Corporation and the industry was a result of customers reducing or cancelling 2020 drilling programs due to commodity price uncertainty.

  • As a result of the decreased Q3 2020 operating days and corresponding revenue, Adjusted EBITDA loss for the three months ended September 30, 2020 was $269, down $951 (139%) from Adjusted EBITDA of $682 for the corresponding 2019 period.

  • Gross margin for the three months ended September 30, 2020 was 26%, down 13% from 30% as compared to the corresponding 2019 period. The 2020 gross margin was negatively impacted by September rig start up costs for anticipated Q4 2020 work combined with minimal operating activity during Q3 2020.

  • For the three months ended September 30, 2020, general and administrative expenses were $589 down $695 (54%) from $1,284 as compared to the corresponding 2019 period. The decrease in general and administrative expenses was as a result of the Corporations cost cutting initiatives implemented in March 2020. Cost cutting initiatives included reduced headcount, salary roll backs and elimination of all discretionary spending.

  • For the three month period ended September 30, 2020, the net loss from continuing operations was $1,633 up $928 (132%) from a net operating loss of $705 as compared to the corresponding 2019 period. Net income from continuing operations were negatively impacted due to the continued decrease in drilling activity since the end of Q1 2020. The loss from continuing operations was partially off set by the Corporations cost cutting initiatives.

NON-GAAP MEASURES

This press release contains references to (i) Adjusted EBITDA and (ii) gross margin. These financial measures are not measures that have any standardized meaning prescribed by IFRS and are therefore referred to as non-GAAP (Generally Accepted Accounting Principles) measures. The non-GAAP measures used by the Corporation may not be comparable to similar measures used by other companies.

(i)

Adjusted EBITDA is defined as "income (loss) from operations before interest income, interest expense, taxes, transaction costs, depreciation and amortization, share-based compensation expense, gains on disposal of property and equipment, impairment expenses, other income, foreign exchange, non-recurring restructuring charges, finance costs, accretion of debentures and other income/expenses, and any other items that the Corporation considers appropriate to adjust given the irregular nature and relevance to comparable operations." Management believes that in addition to net and total comprehensive income (loss), Adjusted EBITDA is a useful supplemental measure as it provides an indication of the results generated by the Corporation's principal business activities prior to consideration of how these activities are financed, how assets are depreciated, amortized and impaired, the impact of foreign exchange, or how the results are affected by the accounting standards associated with the Corporation's stock-based compensation plan. Investors should be cautioned, however, that Adjusted EBITDA should not be construed as an alternative to net income (loss) and comprehensive income (loss) determined in accordance with IFRS as an indicator of the Corporation's performance. The Corporation's method of calculating Adjusted EBITDA may differ from that of other organizations and, accordingly, its Adjusted EBITDA may not be comparable to that of other companies.


Three months ended
September 30,


Nine months ended
September 30,

(000's CAD $)

2020

2019

%
Change


2020

2019

%
Change

Net loss from continuing operations

(1,633)

(705)

132%


(2,376)

(1,143)

108%

Depreciation

1,211

1,131

7%


3,636

3,291

10%

Finance costs

166

173

(4%)


544

500

9%

Other income

(10)

(9)

11%


(52)

(104)

(50%)

Gain from equipment lost in hole

-

-

nm


-

(15)

(100%)

Share-based payments

34

104

(67%)


195

378

(48%)

Transaction costs

35

-

nm


35

146

(76%)

Foreign exchange gain

12

(12)

(200%)


-

6

(100%)

Gain on Extinguishment of Convertible Debenture

(84)

-

nm


(84)

-

nm

Adjusted EBITDA

(269)

682

(139%)


1,898

3,059

(38%)

nm - not meaningful








(ii)

Gross margin is defined as "gross profit from services revenue from continuing operations before stock-based compensation and depreciation". Gross margin is a measure that provides shareholders and potential investors additional information regarding the Corporation's cash generating and operating performance. Management utilizes this measure to assess the Corporation's operating performance. Investors should be cautioned, however, that gross margin should not be construed as an alternative to net income (loss) and comprehensive income (loss) determined in accordance with IFRS as an indicator of the Corporation's performance. The Corporation's method of calculating gross margin may differ from that of other organizations and, accordingly, its gross margin may not be comparable to that of other companies


Three months ended
September 30,


Nine months ended
September 30,

(000's CAD $)

2020

2019

%
Change


2020

2019

%
Change

Income from operations

(925)

731

(227%)


515

3,079

(83%)

Depreciation of property and equipment

1,109

1,059

5%


3,331

3,002

11%

Gross margin

184

1,790

(90%)


3,846

6,081

(37%)

Gross margin %

26%

30%

(13%)


32%

36%

(11%)

nm - not meaningful








FORWARD-LOOKING INFORMATION

Certain statements contained in this press release constitute forward-looking statements or forward-looking information (collectively, "forward-looking information"). Forward-looking information relates to future events or the Corporation's future performance. All information other than statements of historical fact is forward-looking information. The use of any of the words "plan", ""continue", "estimate", "expect", "intend", "might", "may", "will", "should", "believe", "predict", and "forecast" are intended to identify forward-looking information. This press release contains forward-looking information pertaining to, among other things: the Corporation's expectation that the upcoming winter months will see an increase in drilling activity, which activity will remain at below historic levels; the Corporation's expectations regarding the impact on macro-economic factors of the COVID-19 virus, of instability created by OPEC's inability to maintain the global oil supply and the resulting impact of both on commodity prices; the effect of measures implemented by the Corporation to protect its field and office employees while ensuring business continuity; the Corporation's capital expenditure budget for 2020 and expected responses to COVID-19 and commodity pricing; the Corporation's ability to withstand the impact the current commodity price cycle will have on its forecasted activity levels for the remainder of 2020 and into 2021; the belief that the Corporation's principal sources of liquidity, its operating cash flows and operating loan, will be sufficient to fund 2020 operations and other strategic opportunities as well as manage its liquidity risk; the Corporation's anticipation that it will have the ability to adjust its capital structure by issuing new equity or debt, disposing of assets and making adjustments to its operating expenditures and capital expenditure program; the Corporation's belief that it has adequate access to its demand loan facility to provide the necessary liquidity needed to manage fluctuations in the timing of receipt and/or disbursement of operating cash flows; the Corporation's expectations that its financial risk management policies will ensure that all payables are paid within the pre-agreed credit terms; the Corporation's treatment and categorization of doubtful accounts and expectations regarding credit loss rates based on its past experiences and expectations in respect of certain receivables; the Corporation's assessment of its customers' creditworthiness; and the expected effects of seasonality and weather on the Corporation's operations and business, amongst others.

Forward-looking information is presented in this press release for the purpose of assisting investors and others in understanding certain key elements of the Corporation's financial results and business plan, as well as the objectives, strategic priorities and business outlook of the Corporation, and in obtaining a better understanding of the Corporation's anticipated operating environment. Readers are cautioned that such forward-looking information may not be appropriate for other purposes.

Forward-looking information, by its very nature, is subject to inherent risks and uncertainties and is based on many assumptions, both general and specific, which give rise to the possibility that actual results or events could differ materially from the expectations of the Corporation expressed in or implied by such forward-looking information and that the Corporation's business outlook, objectives, plans and strategic priorities may not be achieved. Macro-economic conditions, including public health concerns (including the impact of the COVID-19 pandemic) and other geopolitical risks, the condition of the global economy and, specifically, the condition of the crude oil and natural gas industry including the collapse of global crude oil prices, other commodity prices and the decrease in global demand for crude oil in 2020, and the ongoing significant volatility in world markets may adversely impact drilling and completions programs, which could materially adversely impact the Corporation. In addition to other factors and assumptions which may be identified in this press release, assumptions have been made regarding, among other things: the condition of the global economy, including trade, public health (including the impact of the COVID-19 pandemic) and other geopolitical risks; the stability of the economic and political environment in which the Corporation operates; the effect the stabilization of global crude prices will have on drilling and completion activities in Western Canada; the success of the measures implemented by the Corporation to protect its field and office employees and the ability to ensure business continuity at the same time; the creditworthiness of the Corporation's customers; the effectiveness of the Corporation's financial risk management policies at ensuring all payables are paid within the pre-agreed credit terms; the ability of the Corporation to retain qualified staff; the ability of the Corporation to obtain financing on acceptable terms; the impact of increasing competition; the ability to protect and maintain the Corporation's intellectual property; currency, exchange and interest rates; the regulatory framework regarding taxes and environmental matters in the jurisdictions in which the Corporation operates; and the ability of the Corporation to successfully implement key cost and discretionary spending plan adjustments. Actual results and future events could differ materially from those expected or estimated in such forward-looking information. As a result, the Corporation cannot guarantee that any forward-looking information will materialize and we caution you against relying on any of this forward-looking information. Accordingly, readers should not place undue reliance on forward-looking information.

Additional information on these and other factors are disclosed under the heading "Risks and Uncertainties" herein, in the Corporation's annual information form dated March 25, 2020, and in other reports filed with the securities regulatory authorities in Canada from time to time and available on SEDAR (sedar.com).

Statements, including forward-looking information, are made as of the date of this press release and the Corporation does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. The forward-looking information contained in this press release is expressly qualified by this cautionary statement.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

SOURCE Stampede Drilling Inc.

Cision
Cision

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