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Stampede Drilling Inc. Announces 2020 Second Quarter Results

·18 mins read

CALGARY, AB, July 29, 2020 /CNW/ - Stampede Drilling Inc. ("Stampede" or the "Corporation") (TSXV: SDI) announces today its financial and operational results for the three and six month periods ended June 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 six month periods ended June 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.

SECOND QUARTER 2020 OPERATIONAL OVERVIEW

During the three months ended June 30, 2020, the Corporation recorded an Adjusted EBITDA loss of from continuing operations of $417, an increase of $295 from the prior year comparative period. Reduced global oil demand driven by the novel coronavirus ("COVID-19") health pandemic and the associated economic downturn pressured crude and liquid prices to record lows during the three months ended June 30, 2020, resulting in production shut-ins and minimal drilling and completion activity in Western Canada.

In March 2020, the Corporation implemented key cost and discretionary spending plan adjustments. For the three month period ended June 30, 2020, Administrative expenses were down 66% 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 June 2020, salary and benefit expenses were down 35% 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

  • 100% reduction to Board of Directors cash compensation


Three months ended June 30,

(000's CAD $)

2020

2019

% Change

Administrative expenses

150

437

(66%)

Salaries and benefits

400

616

(35%)

Share-based payments

66

245

(73%)

Depreciation

101

109

(7%)

Total G&A

717

1,407

(49%)

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. The benefit of $150 resulting from the program has been offset against salaries and benefits included in general and administrative expenses.

OUTLOOK

Throughout the second quarter crude oil prices continued to slowly stabilize as lock down measures associated with COVID-19 across the globe gradually eased, increasing the demand for energy. This combined with coordinated production cuts by OPEC and OPEC+ have helped with world crude oil pricing stability and higher prices. As demand and production continue to correct themselves, the Corporation expects increased drilling activity in Western Canada but below historical levels.

The Corporation is forecasting an increase in drilling and completion activity following the summer months. However, the Corporation drilling activity will remain well below prior year levels in the second half of 2020 as producers protect their balance sheet. The corporation will continue to actively monitor and manage risks through periods of lower commodity pricing and industry activity. As at June 30, 2020, the Corporation was in compliance of all covenants related to our operating line facility.


Covenant

June 30, 2020

Interest Coverage Ratio (1)

3.00:1.00 or more

7.19:1.00

Net Funded Debt to EBITDA Ratio (2)

3.00:1.00 or less

1.41:1.00

As at June 30, 2020, $6,801 was drawn on the Corporations total operating loan facility of $15,000.

With regards to the $2,612 convertible debenture due in October 2020, the Corporation is currently assessing its options to request holders to extend the maturity date of the debenture or convert the debenture to equity on the maturity date.

FINANCIAL SUMMARY

SECOND QUARTER 2020 SUMMARY (Compared with the second quarter 2019)

  • Revenue from continuing operations of $275, down 92% from $3,319;

  • Gross margin from continuing operations of $133, down 86% from $931;

  • Adjusted EBITDA loss from continuing operations of ($417), increased 242% from an Adjusted EBITDA loss of ($122);

  • Net loss from continuing operations of ($1,878), increased 14% from ($1,649);

SIX MONTHS ENDED JUNE 30, 2012 SUMMARY (Compared with the six months ended June 30, 2019)

  • Revenue from continuing operations of $11,165, up 1% from $11,082;

  • Gross margin from continuing operations of $3,662, down 15% from 4,291;

  • Adjusted EBITDA from continuing operations of $2,167, down 9% from $2,377;

  • Net loss from continuing operations of ($743), increased 70% from $438;


Three months ended
June 30,

Six months ended
June 30,

(000's CAD $ except per share amounts)

2020

2019

%
Change

2020

2019

%
Change

Continuing operations







Revenue

275

3,319

(92%)

11,165

11,082

1%

Direct operating expenses

142

2,388

(94%)

7,503

6,791

10%

Gross margin (1)

133

931

(86%)

3,662

4,291

(15%)

Net loss from continuing operations

(1,878)

(1,649)

14%

(743)

(438)

70%

Basic and diluted per share

(0.01)

(0.01)

nm

(0.01)

(0.01)

nm

Adjusted EBITDA (1)

(417)

(122)

242%

2,167

2,377

(9%)

Weighted average common shares outstanding

132,046

131,752

0%

132,046

130,184

1%

Weighted average diluted common shares outstanding

132,046

131,752

0%

132,046

130,184

1%

Combined operations (2)







Net income

(1,878)

(1,410)

33%

(743)

631

(218%)

Basic and diluted per share

(0.01)

(0.01)

nm

(0.01)

0.01

nm

Adjusted EBITDA (1)

(417)

(509)

(18%)

2,167

691

214%

Capital expenditures

4

3,970

(100%)

709

4,225

(83%)

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 SIX MONTHS ENDED JUNE 30, 2012


Six months ended June 30,

(000's CAD $ except operating days)

2020

2019(1)

%
Change





Revenue

11,165

11,082

1%

Direct operating expenses

7,503

6,791

10%

Gross margin (2)

3,662

4,291

(15%)

Gross margin %

33%

39%

(15%)

Net loss from continuing operations

(743)

(438)

70%

General and administrative expenses

1,859

2,405

(23%)

Adjusted EBITDA (2)

2,167

2,377

(9%)

Drilling rig operating days

531

558

(5%)

Drilling rig revenue per day

21.0

19.9

6%

Drilling rig utilization

29%

38%

(24%)

CAODC industry average utilization (3)

20%

22%

(9%)

nm - not meaningful




(1) The comparative period has been restated to reflect discontinued operations as discussed in Note 5.




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




  • Revenue in the first six months of 2020 was $11,165, an increase of $83 (1%) compared to $11,082 in the first six months of 2019. The slight increase was as a result of a strong first quarter in 2020 as the Company did not have any operating days in Q2 2020. Q2 2020 revenue of $275 was related to US management services and Canadian third party rebills back to customers. Drilling revenue per day in the first quarter of 2020 remained consistent with the drilling revenue per day in the first quarter of 2019.

  • The Corporation had a total of 531 operating days in the first six months of 2020, a decrease of 27 operating days (5%) from the 558 operating days in the corresponding 2019 period. All 531 operating days occurred in Q1 2020. The drilling rig utilization for the first six months of 2020 was 29%, 45% above the first six months CAODC industry average utilization rate of 20% for 2020. The CAODC industry utilization rate for Q2 2020 was 3.75%.

  • Gross margin for the six months ended June 30, 2020 was 33%, down 15% from 39% as compared to the corresponding 2019 period. The decrease was related to higher direct operating expenses from repair and maintenance expenses and higher startup costs for rigs that began operations in the first quarter of 2020. 2020 gross margins were also negatively impacted by fixed costs in Q2 2020 with no corresponding operating activity.

  • For the six month period ended June 30, 2020, the net loss from continuing operations was $743 up $305 (70%) from $438 as compared to the corresponding 2019 period. For the six month period ended June 30, 2020, Adjusted EBITDA was $2,167 down $210 (9%) from $2,377 as compared to the corresponding 2019 period. For the first six months of 2020, Net income and Adjusted EBITDA from continuing operations were negatively impacted due to the minimal drilling activity in Q2 2020.

  • For the six months ended June 30, 2020, general and administrative expenses were $1,859 down $546 (23%) from $2,405 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.

SECOND QUARTER RESULTS OF CONTINUING OPERATIONS


Three months ended June 30,

(000's CAD $ except per day amounts)

2020

2019(1)

% Change





Drilling rig revenue

275

3,319

(92%)

Direct operating expenses

142

2,388

(94%)

Gross margin (2)

133

931

(86%)

Gross margin %

48%

28%

71%

Net loss from continuing operations

(1,878)

(1,649)

14%

General and administrative expenses

717

1,407

(49%)

Adjusted EBITDA (2)

(417)

(122)

242%

Drilling rig operating days

-

180

(100%)

Drilling rig revenue per day

-

18.4

(100%)

Drilling rig utilization

0%

24%

nm

CAODC industry average utilization (3)

4%

15%

(73%)

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.




  • For the three months ended June 30, 2020, revenue was $275, a decrease of $3,044 (92%) from $3,319 compared to the corresponding 2019 period. The decrease was due to zero drilling activity related to the collapse of oil pricing in Q2 2020. The Q2 2020 revenue was related to US management services and Canadian third party rebills back to customers.

  • For the three months ended June 30, 2020, the Corporation had zero operating days. CAODC industry average utilization rate for the three months ended June 30, 2020 was 3.75%, down 73% from 15% for the corresponding 2019 period.

  • For the three months ended June 30, 2020, gross margin as a percentage of revenue was 48%, an increase of 71% from 28% as compared to the corresponding 2019. The increase in gross margin was due to higher margin work related to the US revenue for management services and third party rebills back to customers.

  • For the three months ended June 30, 2020, net loss from continuing operations of $1,878 was up $229 (14%) from a net loss of $1,649 compared to the corresponding 2019 period. For the three months ended June 30, 2020, Adjusted EBITDA loss was $417, up $295 (242%) from $122 as compared to the corresponding 2019 period. Net loss and Adjusted EBITDA loss from continuing operations were negatively impacted by the overall decrease in Q2 2020 activity.

  • For the three months ended June 30, 2020, general and administrative expenses were $717 down $690 (49%) from $1,407 for the comparable 2019 period. The primary reasons for the overall decrease was related to the cost cutting initiatives implemented in March 2020 due to price collapse of oil and COVID-19.

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
June 30,


Six months ended
June 30,

(000's CAD $)

2020

2019

% Change


2020

2019

% Change

Net loss from continuing operations

(1,878)

(1,649)

14%


(743)

(438)

70%

Depreciation (1)

1,233

1,114

11%


2,425

2,160

12%

Finance costs

157

152

3%


378

327

16%

Other income

(18)

(53)

(66%)


(42)

(95)

(56%)

Gain from equipment lost in hole

-

-

nm


-

(15)

(100%)

Share-based payments

66

245

(73%)


161

274

(41%)

Transaction costs

-

47

(100%)


-

146

(100%)

Foreign exchange gain (loss)

23

22

5%


(12)

18

(167%)

Adjusted EBITDA

(417)

(122)

242%


2,167

2,377

(9%)

nm - not meaningful








(1) Includes depreciation of property and equipment and right-of-use assets


(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
June 30,


Six months ended
June 30,

(000's CAD $)

2020

2019

%
Change


2020

2019

%
Change

Income from operations

(999)

(74)

1,250%


1,440

2,348

(39%)

Depreciation of property and equipment

1,132

1,005

13%


2,222

1,943

14%

Gross margin

133

931

(86%)


3,662

4,291

(15%)

Gross margin %

48%

28%

71%


33%

39%

(15%)

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 slow stabilization of crude oil prices as a result of the gradual easing of lock down measures associated with COVID-19 across the globe, combined with coordinated production cuts by OPEC and OPEC+, will increase the demand for energy, therefore, increasing drilling and completion activity in Western Canada; 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; the ability of the Corporation to extend the maturity date of its $2,612 convertible debenture due in October 2020, or to convert the debenture to equity on the maturity date; 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

View original content: http://www.newswire.ca/en/releases/archive/July2020/29/c6213.html