CALGARY, AB, March 24, 2021 /CNW/ - Stampede Drilling
Inc. ("Stampede" or the "Corporation") (TSXV: SDI) announces today
its financial and operational results for the year ended
December 31, 2020.
The following should be read in conjunction with the
Corporation's consolidated financial statements and the notes
thereto for the year ended December 31,
2020, related management's discussion and analysis and
annual information form, 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.
FINANCIAL SUMMARY
|
Three months
ended
December 31,
|
Year ended
December 31,
|
|
(000's CAD $
except per share amounts)
|
2020
|
2019
|
%
Change
|
2020
|
2019
|
%
Change
|
2018
|
Continuing
operations
|
|
|
|
|
|
|
|
Revenue
|
2,515
|
6,705
|
(62%)
|
14,394
|
23,697
|
(39%)
|
16,028
|
Direct operating
expenses
|
1,496
|
4,589
|
(67%)
|
9,529
|
15,500
|
(39%)
|
10,381
|
Gross margin
(1)
|
1,019
|
2,116
|
(52%)
|
4,865
|
8,197
|
(41%)
|
5,647
|
Net loss from
continuing operations
|
(2,386)
|
(104)
|
2,194%
|
(4,042)
|
(1,247)
|
224%
|
(88)
|
Basic and diluted
loss per share
|
(0.01)
|
(0.00)
|
nm
|
(0.03)
|
(0.01)
|
nm
|
(0.00)
|
Adjusted EBITDA
(1)
|
479
|
1,139
|
(58%)
|
2,377
|
4,126
|
(42%)
|
3,060
|
Weighted average
common shares outstanding
|
132,046
|
132,046
|
0%
|
132,046
|
131,851
|
0%
|
130,541
|
Weighted average
diluted common shares outstanding
|
132,046
|
132,046
|
0%
|
132,046
|
131,851
|
0%
|
130,541
|
Combined
operations (2)
|
|
|
|
|
|
|
|
Net loss
|
(1,666)
|
(154)
|
982%
|
(4,042)
|
(245)
|
1,550%
|
(4,124)
|
Basic and diluted
loss per share
|
(0.01)
|
(0.00)
|
nm
|
(0.03)
|
(0.00)
|
nm
|
(0.03)
|
Adjusted EBITDA
(1)
|
479
|
1,056
|
(55%)
|
2,377
|
4,589
|
(48%)
|
1,776
|
Capital
expenditures
|
703
|
2,295
|
(69%)
|
3,505
|
9,580
|
(63%)
|
16,599
|
nm - not
meaningful
|
|
|
|
|
(1) Refer to "Non-GAAP Measures" for
further information.
|
|
|
|
|
(2) Combined operations represents
the aggregated results of both continuing and discontinued
operations.
|
|
|
|
|
|
|
|
|
|
As at December
31,
|
|
|
|
|
(000's CAD
$)
|
2020
|
2019
(1)
|
%
Change
|
|
|
|
|
Current
assets
|
4,197
|
7,958
|
(47%)
|
|
|
|
|
Total
assets
|
47,784
|
53,182
|
(10%)
|
|
|
|
|
Total current
liabilities
|
10,008
|
16,199
|
(38%)
|
|
|
|
|
Total non-current
liabilities
|
5,005
|
429
|
1,067%
|
|
|
|
|
Shareholders'
equity
|
32,771
|
36,554
|
(10%)
|
|
|
|
|
(1) Includes assets and liabilities
classified as held for sale
|
|
|
|
|
|
|
2020 OPERATIONAL OVERVIEW
2020 was a difficult year for the oil and gas industry marked by
unprecedented challenges. In late Q1, commodity prices drastically
declined due to over supply concerns stemming from failed
negotiations between OPEC+ countries on production curtailments
combined with a decrease in global oil demand due to the COVID-19
pandemic. As a result, producer cash flows were negatively
impacted which resulted in cancelled drilling programs across
North America, temporarily
shutting in of production and cost cutting measures by producers to
protect their balance sheets. Commodity pricing started to improve
in May 2020, however overall
benchmark crude oil prices in 2020 remained 31% lower than the
prior year. As a result, in March
2020, the Corporation implemented key cost and discretionary
spending plan adjustments. For the year ended December 31, 2020, total administrative expenses
were down 35% as compared to the corresponding 2019 period as a
result of the following cost cutting measures:
- Elimination of all discretionary spending, non-essential
travel, and entertainment.
- 18% to 36% reduction to executive cash compensation.
- Employee salary reductions, modified work schedules, job
sharing and layoffs.
- Elimination of all cash compensation for the Board of
Directors.
In addition, the Corporation qualified for the Canadian Federal
Government's Canadian Emergency Wage Subsidy program ("CEWS") which
was used to reduce employee related salary expenses and help
minimize reduction in headcount. For the year ended December 31, 2020, the Corporation recorded
$451 against cost of sales and
$460 against salaries and benefit
expenses.
On October 31, 2020, the
Corporation announced that it had completed the restructuring and
amendment of the Debentures to:
- extend the maturity date of the Debentures to October 31, 2023;
- lowered the conversion price of the Debentures from
$0.49 to $0.21 per Share;
- provide the Corporation with the ability to pay accrued
interest in Shares based on the average trading price of the Shares
over the previous 30 trading days (subject to the prior approval
from the TSX Venture Exchange); and
- update the redemption thresholds in the Debentures, such that
the Corporation: (i) may not redeem the Debentures prior to
October 31, 2021; (ii) may redeem the
Debentures on and after October 31,
2021 and prior to October 31,
2022 at the Redemption Price (as defined in the Debentures),
provided the current market price of the Shares is at least 125% of
the Conversation Price; and (iii) may redeem the Debentures on and
after October 31, 2022 at the
Redemption Price.
On November 30, 2020, the
Corporation finalized a loan facility with the Business Development
Bank of Canada ("BDC") in an
amount of $2,000 (the "BDC
Facility"). The BDC Facility has an interest rate equal to BDC's
floating base rate, currently at 4.55% and a maturity date of
September 1, 2023. In connection with
the BDC Facility, the Corporation granted to BDC a subordinated
security interest in all present and after–acquired property,
except for consumer goods, accounts receivable and inventory.
The security interest of BDC is subordinate in right of payment to
the security interests granted by the Corporation to HSBC Bank
Canada in connection with the 2018 Credit Facility.
In conjunction with the BDC Facility, the Corporation amended
its 2018 Credit Facility, including adjustments to, and suspension
of, certain debt covenant thresholds with HSBC Bank Canada
commencing on December 31, 2020 until
December 31,2021, as well as other
amendments to reflect the establishment of the BDC Facility.
As at December 31, 2020, the
Corporation completed a review of the useful lives and estimated
residual values of its property and equipment. Due to uncertainty
associated with the Corporation's ability to monetize the assets at
values in excess of their net book values, coupled with negative
economic effects of the ongoing COVID-19 pandemic, the Corporation
identified specific spare parts in which the carrying value is not
expected to be fully recoverable. As a result, the
Corporation recognized a write-down of property and equipment of
$720 (2019 - nil), which is
recognized in the statement of comprehensive loss.
OUTLOOK
A turnaround in commodity prices that began in Q4 2020 has
continued into 2021 due to short–term production cuts by
Saudi Arabia and OPEC+, combined
with renewed optimism for rising energy demand due to the
deployment of COVID–19 vaccines around the world. The favorable
increase in commodity pricing has resulted in record drilling
utilization for the Corporation throughout Q1 2021. With the
addition of 2 new customers in 2021, the Corporation had all 10 of
its marketable rigs working during the first quarter.
For the 2nd half of 2021, the Corporation remains
cautious on forecasted drilling activity as COVID–19 variants and
longer–term over supply concerns still create considerable
uncertainty with regards to the outlook in commodity prices.
However preliminary discussions with the Corporation's customer
base indicates a modest increase in capital spending in 2021 vs
2020 due to the current strengthening of commodity prices.
Management will continue to focus on maintaining a prudent capital
structure and positioning the Corporation to take advantage of
growth opportunities. The Corporation's current capital commitments
are $542, in the event market
conditions continue to improve, any additional capital spending by
the Corporation for the remainder of 2021 will be based on
confirmed work with its customers.
RESULTS OF CONTINUING OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 2020
|
Year ended
December 31,
|
(000's CAD $
except operating days)
|
2020
|
2019(1)
|
%
Change
|
|
|
|
|
Revenue
|
14,394
|
23,697
|
(39%)
|
Direct operating
expenses
|
9,529
|
15,500
|
(39%)
|
Gross margin
(2)
|
4,865
|
8,197
|
(41%)
|
Gross margin
%
|
34%
|
35%
|
(3%)
|
Net loss from
continuing operations
|
(4,042)
|
(1,247)
|
224%
|
General and
administrative expenses
|
3,101
|
4,782
|
(35%)
|
Adjusted EBITDA
(2)
|
2,377
|
4,126
|
(42%)
|
Drilling rig
operating days
|
681
|
1143
|
(40%)
|
Drilling rig revenue
per day
|
21.1
|
20.7
|
2%
|
Drilling rig
utilization
|
19%
|
34%
|
(44%)
|
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 of the 2020 annual consolidated
financial statements.
|
(2) Refer
to "Non-GAAP measures" for further information.
|
(3)
Source: The Canadian Association of Oilwell Drilling Contractors
("CAODC") monthly Contractor Summary
|
- In 2020, revenue was $14,394, a
decrease of $9,303 (39%) compared to
$23,697 for the year ended
December 31, 2019. The decrease was
because of decreased drilling activity related to the continued
economic slowdown and the corresponding negative impact on oil and
gas commodity pricing which began in March
2020.
- The Corporation's drilling rig operating days of 681 days for
2020 was a 40% decrease over the 1,143 operating days in 2019.
Drilling rig utilization for 2020 was 19%, which was above the
CAODC industry average utilization rate of 16%. Overall Canadian
drilling activity was down as producers drilling programs were
drastically reduced or eliminated completely.
- As a result of the decreased 2020 operating days and
corresponding revenue, Adjusted EBITDA for the year ended
December 31, 2020 was $2,377, a decrease of $1,749 (42%) from $4,126 for the 2019 corresponding period. The
2020 decrease was partially offset by the $911 of CEWS funding the Corporation qualified
for in 2020.
- For the year ended December 31,
2020, gross margin as a percentage of revenue was 34%, a
decrease of 3% from the corresponding 2019 period. Gross margin was
negatively impacted from fire-up costs in December 2020 for the forecasted Q1 2021 drilling
program. These costs were partially offset by a higher revenue per
day and a reduction in field labor costs due to the $451 CEWS funding the Corporation qualified for
in 2020 which was recorded against cost of sales for the year ended
December 31, 2020.
- General and administrative expenses for the year ended
December 31, 2020 were $3,101 down $1,681
(35%) from $4,782 for the comparable
period of 2019. The 2020 decrease in general and administrative
expenses was because of the Corporation's cost cutting initiatives
implemented in March 2020. Cost
cutting initiatives included reduced headcount, salary roll backs,
elimination of all discretionary spending and incentives earned
during 2020 as part of the Canada
Emergency Wage Subsidy from the Government of Canada. The Corporation recorded $460 against general and administrative expenses,
for the year ended December 31,
2020.
- For the year ended December 31,
2020, the Corporation's net loss was $4,042, an increase of $2,795 (224%) from a net loss of $1,247 for the comparable 2019 period. As well as
the overall drop in drilling activity, the Corporation identified
$720 in specific assets that were
reduced to their salvage value.
FOURTH QUARTER RESULTS OF CONTINUING OPERATIONS
|
Three months ended
December 31,
|
(000's CAD $
except per day amounts)
|
2020
|
2019(1)
|
%
Change
|
|
|
|
|
Drilling rig
revenue
|
2,515
|
6,705
|
(62%)
|
Direct operating
expenses
|
1,496
|
4,589
|
(67%)
|
Gross margin
(2)
|
1,019
|
2,116
|
(52%)
|
Gross margin
%
|
41%
|
32%
|
28%
|
Net loss from
continuing operations
|
(2,386)
|
(104)
|
2,194%
|
General and
administrative expenses
|
653
|
1,093
|
(40%)
|
Adjusted EBITDA
(2)
|
479
|
1,139
|
(58%)
|
Drilling rig
operating days
|
114
|
289
|
(60%)
|
Drilling rig revenue
per day
|
22.0
|
23.2
|
(5%)
|
Drilling rig
utilization
|
12%
|
31%
|
(60%)
|
CAODC industry
average utilization(3)
|
16%
|
23%
|
(30%)
|
nm - not
meaningful
|
(1)
|
The comparative
period has been restated to reflect discontinued operations as
discussed in Note 4 of the 2020 annual consolidated financial
statement
|
(2)
|
Refer to "Non-GAAP
measures" for further information.
|
(3)
|
Source: The Canadian
Association of Oilwell Drilling Contractors ("CAODC") monthly
Contractor Summary
|
As commodity pricing for oil and gas slowly improved during the
year from the dramatic lows of March
2020, producers remained cautious on their drilling program
spending negatively impacting the Corporation's Q4 2020 operating
activity. As a result revenue for the three months ended
December 31, 2020, was $2,515, a decrease of $4,190 (62%) compared to $6,705 for the 2019 corresponding period.
- The Corporation's drilling rig operating days of 114 days for
Q4 2020 was a 60% decrease over the 289 operating days in Q4 2019.
Drilling rig utilization for 2020 was 12%, which was below the
CAODC industry average utilization rate of 16%. Overall Canadian
drilling activity was down as producers drilling programs were
drastically reduced or eliminated completely.
- As a result of the decreased Q4 2020 operating days and
corresponding decrease in revenue, Adjusted EBITDA for the three
months ended December 31, 2020 was
$479, a decrease of $660 (56%) from $1,139 for the 2019 corresponding period.
- For the three months ended December 31,
2020, gross margin as a percentage of revenue was 41%, an
increase of 28% from 32% for the corresponding 2019 period. Gross
margin was up primarily due to the reduction in field labor costs
as a result of the Canadian emergency wage subsidy. The Corporation
recorded $451 against cost of sales
for the three month period ended December
31, 2020.
- General and administrative expenses for the three month period
ended December 31, 2020 were
$653 down $440 (40%) from $1,093 for the comparable period of 2019. The
2020 decrease in general and administrative expenses was because of
the Corporation's cost cutting initiatives implemented in
March 2020. Cost cutting initiatives
included reduced headcount, salary roll backs, elimination of all
discretionary spending and the $130
of CEWS recorded against general and administrative expenses, for
the three months ended December 31,
2020.
- For the three months ended December 31,
2020, the Corporation's net loss was $2,386, an increase of $2,282 from a net loss of $104 for the comparable 2019 period. As part of
the net loss due, the Corporation recorded a write down in assets
of $720 during Q4 2020.
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 net 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
December 31,
|
|
Year ended
December 31,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
|
2020
|
2019
|
%
Change
|
Net loss from
continuing operations
|
(2,386)
|
(104)
|
2,194%
|
|
(4,042)
|
(1,247)
|
224%
|
Depreciation
|
1,922
|
1,055
|
82%
|
|
4,838
|
4,274
|
13%
|
Write-down of
property and equipment
|
720
|
-
|
nm
|
|
720
|
-
|
nm
|
Finance
costs
|
143
|
184
|
(22%)
|
|
687
|
684
|
0%
|
Other
income
|
(4)
|
(19)
|
(79%)
|
|
(56)
|
(123)
|
(54%)
|
Gain from disposition
of property and equipment
|
-
|
(8)
|
(100%)
|
|
-
|
(8)
|
(100%)
|
Gain from equipment
lost in hole
|
-
|
(4)
|
nm
|
|
-
|
(19)
|
(100%)
|
Share-based
payments
|
19
|
50
|
(62%)
|
|
214
|
428
|
(50%)
|
Transaction
costs
|
41
|
10
|
nm
|
|
76
|
156
|
(51%)
|
Foreign exchange
gain
|
24
|
(25)
|
(196%)
|
|
24
|
(19)
|
(226%)
|
Gain on
extinguishment of convertible debenture
|
-
|
-
|
nm
|
|
(84)
|
-
|
nm
|
Adjusted
EBITDA
|
479
|
1,139
|
(58%)
|
|
2,377
|
4,126
|
(42%)
|
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) 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
December 31,
|
|
Year ended
December 31,
|
(000's CAD
$)
|
2020
|
2019
|
%
Change
|
|
2020
|
2019
|
%
Change
|
Income (loss) from
operations
|
(89)
|
1,127
|
(108%)
|
|
426
|
4,206
|
(90%)
|
Depreciation of
property and equipment
|
1,108
|
989
|
12%
|
|
4,439
|
3,991
|
11%
|
Gross
margin
|
1,019
|
2,116
|
(52%)
|
|
4,865
|
8,197
|
(41%)
|
Gross margin
%
|
41%
|
32%
|
28%
|
|
34%
|
35%
|
(3%)
|
nm - not
meaningful
|
|
|
|
|
|
|
|
FORWARD-LOOKING INFORMATION
Certain statements contained in this News 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
"anticipate", "plan", "contemplate", "continue", "estimate",
"expect", "intend", "propose", "might", "may", "will", "could",
"believe", "predict", and "forecast" are intended to identify
forward-looking information.
This News Release contains forward-looking information
pertaining to, among other things: the Corporation's expectations
regarding the recoverability of carrying value of spare parts;
expectations associated with the Corporation's outlook, including
among other things, the impacts of production cuts by Saudi Arabia and OPEC+, rising energy demand
due to the deployment of COVID-19 vaccines, forecasted drilling
activity and capital spending of the Corporation's customers, and
the Corporation's capital spending expectations; the forecasted Q1
2021 drilling program; and the belief that Adjusted EBITDA is a
useful supplemental financial measure, amongst others.
Forward-looking information is presented in this News 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 recent collapse of global crude oil prices,
other commodity prices and the recent 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 News 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 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
in the Corporation's management's discussion and analysis dated
March 24, 2021 and 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 News 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 News
Release is expressly qualified by this cautionary statement.
SOURCE Stampede Drilling Inc.