The results in all markets were pretty good. Utilization was down in Canda and the States a bit but rates are up so overall profitability is improved. Debt did get reduced by 116 million and on target for 200 million for the whole year. However, the debt restructure still has not been completed and they have now categorized the Senior notes as current debt. On the good side, company is well within its lending covenants, on the bad side, this renegotiation is taking a whole lot longer than it should. The release below (partial post, the complete version is available elsewhere), sauys the expect to complete the renegotiation in the 3rd quarter of 2023.
As long as drilling and service activity remains strong and rates are good, this should be another good quarter.
Excerpt from thismornings release by the company.
The Company's working capital at June 30, 2023, was a deficit of $1,188.1 million, compared to a deficit of $707.8 million at December 31, 2022. The deficit increase was largely due to the Company's revolving credit facility (the "
Credit Facility") and unsecured Senior Notes (the "
Senior Notes") being reclassified as current. The Company is in discussion with its banking syndicate on extending its existing revolving Credit Facility and on obtaining a new term loan facility, which facility will be used to retire the Company's Senior Notes due in April 2024. The Company has not yet finalized such refinancing or the terms thereof and, if it is successfully completed, it contemplates completion of such refinancing before the end of the third quarter of 2023.
The Company's available liquidity, consisting of cash and available borrowings under its $900.0 million the Credit Facility, was $171.4 million at June 30, 2023.
FUNDS FLOW FROM OPERATIONS AND WORKING CAPITAL ($ thousands, except per common
share data) | Three months ended June 30 | | Six months ended June 30 |
| 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
| Cash provided by operating activities | 166,771 | | 99,520 | | 68 | | 271,345 | | 154,076 | | 76 |
| Funds flow from operations | 116,764 | | 81,497 | | 43 | | 235,055 | | 158,238 | | 49 |
| Funds flow from operations percommon share | $0.64 | | $0.47 | | 36 | | $1.28 | | $0.94 | | 36 |
| Working capital 1 | (1,188,071) | | (707,800) | | 68 | | (1,188,071) | | (707,800) | | 68 |
| 1 Comparative figure as at December 31, 2022 |
| | | | | | | | | | | | | |
During the three months ended June 30, 2023, the Company generated funds flow from operations of $116.8 million ($0.64 per common share) compared to funds flow from operations of $81.5 million ($0.47 per common share) for the three months ended June 30, 2022, an increase of 43 percent. For the six months ended June 30, 2023, the Company generated funds flow from operations of $235.1 million ($1.28 per common share) an increase of 49 percent from $158.2 million ($0.94 per common share) for the six months ended June 30, 2022. The increase in funds flow from operations for the six months ended June 30, 2023, compared to the same period of 2022 is largely due to the increase in activity and revenue rates compared to the prior period as a result of the oil and natural gas industry's generally positive operating environment.
At June 30, 2023, the Company's working capital was a deficit of $1,188.1 million, compared to a working capital deficit of $707.8 million at December 31, 2022. The deficit was largely due to the Credit Facility and the Senior Notes being classified as current. The Company is in discussion with its banking syndicate on extending its existing revolving Credit Facility and on obtaining a new term loan facility, which facility will be used to retire the Company's Senior Notes due in April 2024. The Company has not yet finalized such refinancing or the terms thereof and, if it is successfully completed, it contemplates completion of such refinancing before the end of the third quarter of 2023..
The Company currently expects funds generated by operations, combined with current and future credit facilities, to fully support the Company's current operating and capital requirements. The Company's Credit Facility provides for total borrowings of $900.0 million, of which $127.4 million was undrawn and available at June 30, 2023.
INVESTING ACTIVITIES | | Three months ended June 30 | | Six months ended June 30 |
| ($ thousands) | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
| Purchase of property and equipment | (56,445) | | (54,279) | | 4 | | (106,324) | | (86,230) | | 23 |
Proceeds from disposals of property
and equipment | 3,299 | | 4,189 | | (21) | | 3,454 | | 46,936 | | (93) |
| Distribution to non-controlling interest | — | | (1,852) | | nm | | — | | (1,852) | | nm |
| Net change in non-cash working capital | (3,769) | | 3,205 | | nm | | 3,769 | | 8,902 | | (58) |
| Cash used in investing activities | (56,915) | | (48,737) | | 17 | | (99,101) | | (32,244) | | nm |
| nm - calculation not meaningful |
Net purchases of property and equipment for the second quarter of 2023 totaled $53.1 million (2022 - $50.1 million). Net purchases of property and equipment during the first six months of 2023 totaled $102.9 million (2022 - $39.3 million). The purchase of property and equipment for the first six months of 2023 consists of $12.0 million in upgrade and growth capital and $94.3 million in maintenance capital.
FINANCING ACTIVITIES | | Three months ended June 30 | | Six months ended June 30 |
| ($ thousands) | 2023 | | 2022 | | % change | | 2023 | | 2022 | | % change |
| Proceeds from long-term debt | 28,285 | | 26,705 | | 6 | | 36,547 | | 28,605 | | 28 |
| Repayments of long-term debt | (93,824) | | (23,460) | | nm | | (137,729) | | (65,394) | | nm |
Lease obligation principal
repayments | (1,443) | | (2,291) | | (37) | | (10,387) | | (4,189) | | nm |
| Interest paid | (41,653) | | (41,434) | | 1 | | (64,422) | | (53,887) | | 20 |
Issuance of common shares under
share option plan | — | | — | | — | | — | | 36 | | nm |
Purchase of common shares held in
trust | (412) | | (405) | | 2 | | (947) | | (780) | | 21 |
| Cash used in financing activities | (109,047) | | (40,885) | | nm | | (176,938) | | (95,609) | | 85 |
| nm - calculation not meaningful |
The Company's available bank facilities consist of a $900.0 million Credit Facility, of which $127.4 million was available and undrawn as of June 30, 2023. In addition, the Company has US $50.0 million secured letter of credit facility, of which US $5.4 million was available as of June 30, 2023.
In the fourth quarter of 2022, the Company classified its Credit Facility as current. Furthermore, during the second quarter of 2023, the Company classified the Senior Notes as current. The Company is in discussion with its banking syndicate on extending its existing revolving Credit Facility and on obtaining a new term loan facility, which facility will be used to retire the Company's Senior Notes due in April 2024. The Company has not yet finalized such refinancing or the terms thereof and, if it is successfully completed, it contemplates completion of such refinancing before the end of the third quarter of 2023.
The Company may at any time and from time to time acquire Senior Notes for cancellation by means of open market repurchases or negotiated transactions. The Company is limited in the acquisition and cancellation of the Senior Notes up to $25.0 million under applicable covenants. Senior Notes may be repurchased for redemption in excess of $25.0 million if certain criteria are met. No such repurchases occurred during the six months ended June 30, 2023.
Covenants The following is a list of the Company's currently applicable covenants and the calculations as at June 30, 2023:
| | Covenant | | | June 30, 2023 |
| The Credit Facility | | | | |
| Total Debt to Consolidated EBITDA1 | ≤ 5.00 | | | 2.69 |
| Consolidated EBITDA to Consolidated Interest Expense1,2 | ≥ 2.50 | | | 3.69 |
| Consolidated Senior Debt to Consolidated EBITDA1,3 | ≤ 2.50 | | | 1.52 |
| 1 Please refer to Non-GAAP Measures for Consolidated EBITDA definition. |
| 2 Consolidated Interest Expense is defined as all interest expense calculated on twelve month rolling consolidated basis. |
| 3 Consolidated Senior Debt is defined as Consolidated Total Debt minus Subordinated Debt. |
As at June 30, 2023, the Company was in compliance with all covenants related to the Credit Facility.
The Credit Facility The Credit Facility agreement, available on SEDAR+ including amendments, requires that the Company comply with certain covenants including Consolidated Total Debt to Consolidated EBITDA ratio, Consolidated EBITDA to Consolidated Interest Expense ratio and a Consolidated Senior Debt to Consolidated EBITDA ratio as detailed above.
The Credit Facility also contains certain covenants that place restrictions on the Company's ability to repurchase or redeem Senior Notes; 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 Facility agreement, dated December 17, 2021, permitted encumbrances are limited to $25.0 million.
The Senior Notes The note indenture governing the Senior Notes, available on SEDAR+, contains certain restrictions and exemptions on the Company's ability to pay dividends, purchase and redeem shares and subordinated debt of the Company, and make certain restricted investments. Limitations on these restrictions are tempered by the existence of a number of exceptions to the general prohibition, including baskets allowing for restricted payments.
The note indenture also restricts the 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 of June 30, 2023, the Company has not incurred additional indebtedness that would require the Fixed Charge Coverage Ratio to be calculated. As is the case with restricted payments, there are a number of exceptions to this prohibition on the incurrence of indebtedness, including the incurrence of debt under credit facilities up to the greater of $900.0 million or 22.5 percent of the Company's consolidated tangible assets and of additional secured debt subordinated to the credit facilities up to the greater of US $125.0 million or four percent of the Company's consolidated tangible assets.