Q4 Resultsbtw I realize no one else is on this board. Hoping that someone reads and replies to the posts! Lookin at the 4Q results - lousy - which isn't a surprise, there is no where to go but up! Hopefully Q1 produces some good numbers. Results should be out in the beginning of May.
STAMPEDE DRILLING INC. ANNOUNCES 2020 FORTH QUARTER RESULTS
Stampede Drilling Inc. has released its financial and operational results for the year ended Dec. 31, 2020.
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.
FINANCIAL SUMMARY Three months ended Dec. 31, Year ended Dec. 31, (000's CAD $ except per share amounts) 2020 2019 2020 2019 2018 Continuing operations Revenue 2,515 6,705 14,394 23,697 16,028 Direct operating expenses 1,496 4,589 9,529 15,500 10,381 Gross margin (1) 1,019 2,116 4,865 8,197 5,647 Net loss from continuing operations (2,386) (104) (4,042) (1,247) (88) Basic and diluted loss per share (0.01) (0.00) (0.03) (0.01) (0.00) Adjusted EBITDA (1) 479 1,139 2,377 4,126 3,060 Combined operations (2) Net loss (1,666) (154) (4,042) (245) (4,124) Basic and diluted loss per share (0.01) (0.00) (0.03) (0.00) (0.03) Adjusted EBITDA (1) 479 1,056 2,377 4,589 1,776 Capital expenditures 703 2,295 3,505 9,580 16,599 (1) Refer to "Non-GAAP Measures" for further information. (2) Combined operations represents the aggregated results of both continuing and discontinued operations.
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 Dec. 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 Dec. 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 Dec. 31, 2020 until Dec. 31,2021, as well as other amendments to reflect the establishment of the BDC Facility.
As at Dec. 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
In 2020, revenue was $14,394, a decrease of $9,303 (39%) compared to $23,697 for the year ended Dec. 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 Dec. 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 Dec. 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 Dec. 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 Dec. 31, 2020.
General and administrative expenses for the year ended Dec. 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 Dec. 31, 2020.
For the year ended Dec. 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
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 Dec. 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 Dec. 31, 2020 was $479, a decrease of $660 (56%) from $1,139 for the 2019 corresponding period.
For the three months ended Dec. 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 Dec. 31, 2020.
General and administrative expenses for the three month period ended Dec. 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 Dec. 31, 2020.
For the three months ended Dec. 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.