CanElson Announces Fourth Quarter and Annual Financial Results and Declares Initial Dividend

Marketwired

CALGARY, ALBERTA--(Marketwire - March 12, 2012) - CanElson Drilling Inc. ("CanElson" or the "Corporation") (TSX:CDI.TO - News) announces annual and fourth quarter financial results and declares initial dividend.

ANNUAL 2011 HIGHLIGHTS:





--  Services revenue $184.8 million (2010: $67.8 million) 

--  Top decile Canadian utilization of 66% compared to an industry

    utilization level of 50% 

--  United States utilization of 84% 

--  Services gross profit of $76.7 million (2010: $18.3 million) 

--  2011 EBITDA of $66.1 million (2010: $13.9 million) 

--  2011 income attributable to shareholders of $31.3 million (2010: $4.8

    million) 

--  Two corporate acquisitions acquiring 12 drilling rigs operating in the

    Bakken resource play 

--  Completed construction and deployment of 5 tele-double drilling rigs 



FOURTH QUARTER 2011 HIGHLIGHTS:





--  Services revenue in Q4 2011 of $64.1 million (Q4 2010: $24.4 million) 

--  Top decile Canadian utilization of 77% compared to an industry

    utilization level of 61% 

--  United States utilization of 84% 

--  Q4 2011 EBITDA margin of 39% (Q4 2010: 28%) 

--  Q4 2011 services gross profit of $28.8 million (Q4 2010: $7.5 million) 

--  Q4 2011 EBITDA of $24.8 million (Q4 2010: $6.8 million) 

--  Q4 2011 income attributable to shareholders of $11.3 million (Q4 2010 of

    $3.3 million) 

--  Completed construction and deployment of 1 tele-double drilling rig to

    Alberta 



For the year ended December 31, 2011 CanElson achieved 375% growth in EBITDA to $66 million and 275% growth in diluted earnings per share to $0.45 per share which compares to the prior year EBIDTA of $13.9 million and diluted earnings per share of $0.12. Fourth quarter EBITDA was $24.8 million and diluted earnings per share was $0.15 which compares to 2010 fourth quarter EBITDA and basic and diluted earnings per share of $6.8 million and $0.07 respectively. The increase in these fourth quarter and annual financial measures compared to the same period last year is a result of strengthening EBITDA margins and significant growth in the average drilling rig fleet available for operation.

Contracted organic rig builds continue to be delivered as planned. During the fourth quarter CanElson delivered one "purpose-built" small footprint ultra-heavy-duty telescoping double drilling rig ("tele-double") to drill deep horizontal wells with expected measured depths of up to 5,500 metres. Subsequent to year end, CanElson deployed a tele-double to the Permian Basin of west Texas under a term committed contract and the Corporation is currently constructing an additional tele-double with deployment to the Permian Basin of west Texas expected for April 2012. CanElson has ordered long lead items for an additional tele-double which could be constructed and deployed in June 2012 if a satisfactory customer commitment is obtained. Completion of construction and delivery of any additional drilling rigs are dependent upon obtaining satisfactory customer commitments.

The majority of CanElson's rig fleet continues to be purpose built tele-doubles reflecting management's view that these are the most efficient drilling rigs from both capital and operating perspectives for resource plays that the Corporation targets. These tele-doubles are designed for minimum rig up and rig out times, lower cost transportation and highly reliable operation, especially for long-reach horizontal wells. This strategy allows CanElson to offer competitive rates through the full cycle, building long-term customer relationships while targeting top quartile returns for shareholders. For select resource plays CanElson will investigate customer enquiries for modern triple drilling rigs.

As a result of CanElson's growth in funds flow from operations and strong financial position, the Corporation's Board of Directors has approved the implementation of a dividend policy, which provides for the payment of a quarterly dividend. The Board of Directors has declared an initial quarterly dividend of $0.05 per share ($0.20 annually) for the three month period ended December 31, 2011, payable on April 12, 2012 to shareholders of record at the close of business on March 26, 2012. Management believes the Corporation can pursue disciplined but aggressive growth and return value to our shareholders through a dividend.

President and CEO Randy Hawkings states, "We continue our combination of effective capital deployment and efficient operations of good people and rigs, which in turn has given us a robust financial position, thereby allowing us to pay a dividend while simultaneously continuing our disciplined but aggressive growth plans."

Derrick Big Eagle, Vice President Business Development, has left the company to pursue exploration and production (E&P) opportunities. We wish Derrick all the best in his E&P ventures, and would like to thank him for his help integrating Eagle Drilling as well as championing various business development opportunities. We look forward to having Derrick as a valued customer in the future.

At the date of this press release, CanElson was operating 36 rigs: 21 drilling rigs in the WCSB, 7 (net: 6) drilling rigs in Texas, 4 drilling rigs in North Dakota, 2 (net: 1) drilling rigs and 2 (net: 1) service rigs in the Misantla-Tampico Basin of Mexico. Eighty eight percent of CanElson's owned drilling rig fleet is operating in oil resource plays and has an average age of less than 4.4 years.

Audited financial information extracted from the consolidated financial statements and management's discussion and analysis (MD&A) are included below. The full text of the audited financial statements and MD&A are to be posted on the SEDAR website at www.sedar.com.

FINANCIAL HIGHLIGHTS

(Tabular amounts are stated in thousands of Canadian dollars, except per share amounts and rig operating days)





                                  Three months ended      For the year ended

                                        December 31,            December 31,

                                 2011    2010 change     2011    2010 change

----------------------------------------------------------------------------

Services revenue              $64,098 $24,409   163% $184,758 $67,825   172%

Rig construction                                                            

 revenue                            -   5,456     nm   $4,377  $5,456   -20%

EBITDA                (i)     $24,779  $6,843   262%  $66,067 $13,895   375%

Income attributable to                                                      

 shareholders of the                                                        

 corporation                  $11,324  $3,304   243%  $31,329  $4,808   552%

Income per share                                                            

  Basic                         $0.15   $0.07   121%    $0.45   $0.12   279%

  Diluted                       $0.15   $0.07   115%    $0.45   $0.12   275%

Funds flow            (ii)    $20,665  $6,506   218%  $60,357 $12,890   368%

Gross Margin                                                                

 (services)           (iii)   $28,831  $7,479   285%  $76,654 $18,328   318%

Gross Profit (rig                                                           

 construction)                      -       -     nm     $788  $1,115   -29%

outstanding                    73,666  50,054    47%   69,536  39,242    77%

----------------------------------------------------------------------------



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION





                                                     December       December

(Stated in thousands of Canadian dollars)            31, 2011       31, 2010

                                                                            

ASSETS                                                                      

Current assets:                                                             

  Cash                                            $    10,424    $     4,357

  Trade and other receivables                          46,123         21,986

  Prepaid expenses and deposits                           976            516

  Inventory                                                49          2,425

                                                -------------  -------------

                                                       57,572         29,284

                                                                            

Property and equipment                                240,756        111,733

Deferred tax assets                                         -              -

Goodwill                                               25,944          5,251

                                                -------------  -------------

                                                                            

                                                  $   324,272    $   146,268

-------------------------------------------------------------  -------------

LIABILITIES AND EQUITY                                                      

Current liabilities:                                                        

  Trade payables and accrued liabilities               19,925         14,681

  Advances for rig construction                             -          3,820

  Deferred revenue                                      1,364              -

  Current tax liabilities                               4,724             91

  Loans and borrowings                                  5,481          3,442

                                                -------------  -------------

                                                       31,494         22,034

                                                                            

Deferred revenue                                        2,373              -

Loans and borrowings                                    9,051          3,667

Deferred tax liabilities                               25,103          5,156

                                                -------------  -------------

                                                       68,021         30,857

                                                -------------  -------------

                                                                            

Equity                                                                      

  Share capital                                       205,139        105,209

  Employee benefit reserve                              2,482          1,368

  Foreign currency translation reserve                  2,371           (62)

  Retained earnings                                    35,749          4,420

                                                -------------  -------------

Equity attributable to shareholders of the                                  

 Corporation                                          245,741        110,935

                                                                            

Equity attributable to non-controlling interest        10,510          4,476

                                                                            

                                                -------------  -------------

Total equity                                          256,251        115,411

                                                -------------  -------------

                                                                            

                                                  $   324,272    $   146,268

-------------------------------------------------------------  -------------



CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME





                                Three month period       For the year ended 

                                      December 31,             December 31, 

(Stated in thousands of                                                     

 Canadian dollars - except                                                  

 per share data)                   2011       2010          2011       2010 

---------------------------------------------------  -----------------------

                                                                            

Services revenue               $ 64,098   $ 24,409     $ 184,758   $ 67,825 

Cost of sales:                                                              

  Other direct operating                                                    

   expenses                      35,267     16,930       108,104     49,497 

  Depreciation                    4,339      1,620        12,843      4,870 

  Stock based compensation          178         34           474         59 

                             ----------------------  -----------------------

                                 39,784     18,584       121,421     54,426 

                             ----------------------  -----------------------

Gross profit                     24,314      5,825        63,337     13,399 

                             ----------------------  -----------------------

Rig sales                             -      5,456         4,377      5,456 

Cost of rig sales                     -      4,341         3,589      4,341 

                             ----------------------  -----------------------

Gross profit                          -      1,115           788      1,115 

                             ----------------------  -----------------------

Total gross profit               24,314      6,940        64,125     14,514 

                             ----------------------  -----------------------

Gain on disposal of property                                                

 and equipment                        -         90             -        283 

                             ----------------------  -----------------------

Expenses:                                                                   

  Administration expenses         4,022      1,751        11,375      5,548 

  Business acquisition                                                      

   transaction costs                  -          -         1,289        640 

  Stock based compensation          340        142         1,173        536 

  Foreign exchange (gains)                                                  

   losses                           361        134          (346)       242 

                             ----------------------  -----------------------

                                  4,723      2,027        13,491      6,966 

                             ----------------------  -----------------------

Income before interest and                                                  

 taxes                           19,591      5,003        50,634      7,831 

Interest expense                    236         95         1,057        434 

                             ----------------------  -----------------------

Income before income tax         19,355      4,908        49,577      7,397 

Income tax expense                7,378      1,604        16,076      2,589 

                             ----------------------  -----------------------

Net income                     $ 11,977   $  3,304     $  33,501   $  4,808 

Other comprehensive income                                                  

 (loss)                                                                     

Foreign currency translation                                                

 differences for foreign                                                    

 operations                      (1,428)       (48)        2,781        (62)

                             ----------------------  -----------------------

Total comprehensive income     $ 10,549   $  3,256     $  36,282   $  4,746 

----------------------------------------------------------------------------

Income attributable to:                                                     

Shareholders of the                                                         

 Corporation                   $ 11,324   $  3,304     $  31,329   $  4,808 

Non-controlling interest            653          -         2,172          - 

                             ----------------------  -----------------------

                               $ 11,977   $  3,304     $  33,501   $  4,808 

                             ----------------------  -----------------------

Total comprehensive income                                                  

 attributable to:                                                           

Shareholders of the                                                         

 Corporation                   $  9,820   $  3,256     $  33,762   $  4,746 

Non-controlling interest            729          -         2,520          - 

                             ----------------------  -----------------------

                               $ 10,549   $  3,256     $  36,282   $  4,746 

                             ----------------------  -----------------------

Income per share                                                            

    Basic                      $   0.15   $   0.07     $    0.45   $   0.12 

    Diluted                    $   0.15   $   0.07     $    0.45   $   0.12 

---------------------------------------------------  -----------------------



REVENUE AND OPERATING EXPENSE HIGHLIGHTS





                            Three months ended            For the year ended

                                  December 31,                  December 31,

                         2011      2010 Change         2011      2010 Change

----------------------------------------------  ----------------------------

Oilfield services                                                           

 segment                                                                    

  Services revenue                                                          

    Domestic        $  40,133 $  14,310   180%   $  111,761 $  37,887   195%

    Foreign            23,965    10,099   137%       72,997    29,938   144%

                   ---------------------------  ----------------------------

                       64,098    24,409   163%      184,758    67,825   172%

                                                                            

  Other direct                                                              

   operating                                                                

   expenses            35,267    16,930   108%      108,104    49,497   118%

                   ---------------------------  ----------------------------

                                                                            

  Gross margin      $  28,831 $   7,479   285%   $   76,654 $  18,328   318%

                   ---------------------------  ----------------------------

  Gross margin %          45%       31%                 41%       27%       

                                                                            

  General and                                                               

   administration                                                           

   expenses             4,052     1,751   131%       11,375     5,548   105%

                                                                            

  EBITDA               24,779     6,843   262%       66,067    13,895   375%

  EBITDA %                39%       28%    38%          36%       20%    75%

                                                                            

Operating days                                                              

 (spud to rig                                                               

 release)               2,208       862   156%        6,694     2,603   157%

                                                                            

  Revenue per                                                               

   operating day                                                            

   (Domestic)       $   27.95 $   24.97    12%   $    25.77 $   22.88    13%

  Revenue per                                                               

   operating day                                                            

   (Foreign)        $   31.04 $   36.33   -15%   $    30.97 $   31.61    -2%

  Other operating                                                           

   expenses per day $   15.97 $   19.64   -19%   $    16.15 $   19.02   -15%

                                                                            

Rig construction                                                            

 and retrofit                                                               

 segment                                                                    

  Rig and equipment                                                         

   sales            $       - $   5,456     nm   $    4,377 $   5,456   -20%

  Cost of rig and                                                           

   equipment sales          -     4,341     nm        3,589     4,341   -17%

                   ---------------------------  ----------------------------

                    $       - $   1,115     nm   $      788 $   1,115   -29%

----------------------------------------------  ----------------------------



NON-GAAP MEASURES

This press release contains references to (i) EBITDA, (ii) funds flow and (iii) gross margin. These financial measures are not measures that have any standardized meaning prescribed by IFRSs and are therefore referred to as non-GAAP measures. The non-GAAP measures used by the Corporation may not be comparable to similar measures used by other companies.





(i)  EBITDA is defined as "income before interest expense (income), income  

     taxes, depreciation, stock based compensation expense and foreign      

     exchange." Management believes that in addition to Net and             

     comprehensive income (loss), 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 the results are taxed in various          

     jurisdictions, or how the results are affected by the accounting       

     standards associated with the Corporation's stock based compensation   

     plan.                                                                  

                                                                            

                                    Three month ended    For the year ended 

                                        2011     2010        2011      2010 

------------------------------------------------------  --------------------

Income (loss) before finance costs                                          

 and taxes                         $  19,561 $  5,003    $ 50,634  $  7,831 

Transaction costs                          -        -       1,289       640 

Depreciation                           4,339    1,620      12,843     4,870 

Stock based compensation                 518      176       1,647       595 

Foreign exchange loss (gain)             361      134        (346)      242 

Gain on disposal of property and                                            

 equipment                                 -      (90)          -      (283)

                                  --------------------  --------------------

EBITDA                             $  24,779 $  6,843    $ 66,067  $ 13,895 

------------------------------------------------------  --------------------

                                                                            

(ii) Funds flow from operations is defined as "cash provided by operating   

     activities before the change in non- cash working capital". Funds flow 

     from operations is a measure that provides shareholders and potential  

     investors additional information regarding the Corporation's liquidity 

     and its ability to generate funds to finance its operations. Management

     utilizes this measurement to assess the Corporation's ability to       

     finance operating activities and capital expenditures.                 

                                                                            

                                   Three month ended      For the year ended

                                     2011       2010         2011       2010

----------------------------------------------------  ----------------------

Operating cash flow            $   14,196 $    6,142   $   56,107 $    9,132

Changes in working capital          6,469        364        4,250      3,758

                              ----------------------  ----------------------

Funds flow                     $   20,665 $    6,506   $   60,357 $   12,890

----------------------------------------------------  ----------------------







(iii) Gross margin is defined as "gross profit from services revenue 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 operating     

      performance. Management utilizes this measurement to assess the       

      Corporation's operating performance.                                  

                                                                            

                                   Three month ended      For the year ended

                                     2011       2010         2011       2010

----------------------------------------------------  ----------------------

Gross profit                   $   24,314 $    5,825   $   63,337 $   13,399

Depreciation                        4,339      1,620       12,843      4,870

Stock based compensation              178         34          474         59

                              ----------------------  ----------------------

Gross margin                   $   28,831 $    7,479   $   76,654 $   18,328

----------------------------------------------------  ----------------------



The Corporation is engaged in the manufacture, acquisition, operation and sale of rigs into business relationships involving the Corporation for the oil and gas industry. The Corporation currently operates in the western Canadian sedimentary basin ("WCSB"), the United States and Mexico. The Corporation's WCSB operations are currently focused in Alberta, Saskatchewan and Manitoba. The United States operations are currently focused in the Permian Basin of west Texas and the Williston Basin of North Dakota. The Corporation's Mexico operations are conducted through a joint venture Company, Diavaz CanElson de Mexico, S.A. de C.V. ("DCM" or the "Joint Venture"), of which CanElson holds a 50% ownership interest, and is currently focused in the Ebano-Panuco-Cacalilao fields of the Misantla-Tampico Basin of Mexico.

FORWARD-LOOKING INFORMATION

This press release contains certain statements or disclosures relating to CanElson that are based on the expectations of CanElson as well as assumptions made by and information currently available to CanElson which may constitute forward-looking information under applicable securities laws. In particular, this press release contains forward-looking information related to the deployment of one drilling rig to the Permian Basin of West Texas in April of 2012; the possible deployment of a drilling rig in June 2012 and management's belief that the Corporation can pay a dividend and still pursue disciplined but aggressive growth. Such forward looking information involves material assumptions and known and unknown risks and uncertainties, certain of which are beyond CanElson's control. Many factors could cause the performance or achievement by CanElson to be materially different from any future results, performance or achievements that may be expressed or implied by such forward looking information. CanElson's Annual Information Form and other documents filed with securities regulatory authorities (accessible through the SEDAR website at www.sedar.com) describe the risks, material assumptions and other factors that could influence actual results and which are incorporated herein by reference. CanElson disclaims any intention or obligation to publicly update or revise any forward looking information, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.

Contact:
Randy Hawkings
CanElson Drilling Inc.
President & Chief Executive Officer
(403) 266-3922

Robert Skilnick
CanElson Drilling Inc.
Chief Financial Officer
(403) 266-3922

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