Xtreme Reports Record Quarterly and Full Year 2012 Financial Results and Appointment of CEO

Marketwired

CALGARY, ALBERTA--(Marketwire - Mar 6, 2013) - Xtreme Drilling and Coil Services (XDC.TO) announce fourth quarter 2012 and full year operating results. It is anticipated that filing will take place on SEDAR of audited Consolidated Financial Statements and Notes to the audited Consolidated Financial Statements and Management''s Discussion and Analysis for the twelve months ended December 31, 2012 on Friday, March 8, 2013.

Xtreme has scheduled a conference call to discuss results with investors, analysts, and stakeholders on Thursday, March 7, 2013, beginning promptly at 9:00 am MT (10:00 am CT, 11:00 am ET).

Tom Wood, Chief Executive Officer, will host the conference call with participation from Matt Porter, Chief Financial Officer.

Conference operator dial‐in numbers

To participate in the conference call, please dial in as follows approximately ten minutes before the start time in your time zone.

+1 866-225-2055 (North America Toll‐Free) or +1 416‐340-8410 (Alternate)

An audio replay of the call will be available until Thursday, March 14, 2013. To access the replay, call +1 800‐408‐3053 or +1 905‐694‐9451 and enter pass code 9289172.

Highlights

  • In light of the dramatic turnaround in financial and operating performance, the Board of Directors has removed the interim designation and appointed Tom Wood as Chief Executive Officer and suspended the CEO search. As a founding shareholder Mr. Wood has been involved in the reorganization of the Drilling Segment which has led to significantly improved profitability. In addition, Mr. Wood led the restructuring effort to turn the Coil Services segment to profitability over the past six months. While the financial performance has recovered significantly from the second quarter 2012 low, the Company is focused on maintaining this momentum to attain a profitability level in the top quartile among peers, by year end. The executive team is fully dedicated to achieving this target while focusing on strengthening the balance sheet and liquidity generation to drive organic growth.
  • Record adjusted EBITDA of $14.8 million in the fourth quarter of 2012, an increase of 44% over the previous quarter and 140% over the fourth quarter of 2011. The record quarter was driven by strong performance in both the Drilling and Coil Services segments. The US operations for both the Drilling and Coil Services segments recognized a significant increase in operating margin due to recent cost controls and process improvements. For the year ended December 31, 2012, adjusted EBITDA increased to $39.7 million as compared to $21.9 million for the prior year. 
  • Record revenue of $50.4 million in the fourth quarter of 2012, an increase of 6% over the previous quarter and 61% over the fourth quarter of 2011. For the year ended December 31, 2012 the Company recognized revenue of $174.2 million, an increase of 67% or $70.2 million from 2011. In addition, operating days for 2012 increased to 6,550 as compared to 4,602 in 2011. The increase in revenue for the year was a function of 42% more operating days in 2012 and an increase in average revenue per day to $26,588 from $22,594 in 2011.
  • The Coil Services segment (includes U.S. and Saudi Arabia XSR) increased operating profit to $2.6 million in the fourth quarter of 2012 as compared to a loss in the previous quarter of $260 thousand. This was driven by the US division which generated an operating profit on strong cost controls and operational reorganization as well as the Saudi Arabia division which increased profitability on stronger utilization for the quarter.
  • Completed aggressive capital expansion program in which the Company built eight XDR 500 drilling rigs, converted three XDR 400 rigs to XDR 500 rigs and built five new XSR large diameter coiled tubing units. With the subsequent sale of one of the new-build XSR rigs in the first quarter of 2013, the Company currently has 21 XDR rigs and 7 XSR units available to work.
  • Renewed the $150 million credit facility with the existing syndicate of banks at year end. Finished 2012 with $142 million in net debt (total debt less cash) and a funded debt to EBITDA ratio of 3.63. This marks significant improvement from the peak funded debt to EBITDA ratio of 5.73 at June 30, 2012. With the continued focus on improving the balance sheet, the Company is committed to aggressively bring down leverage ratios over the coming quarters. Free cash flow generation should be significant during 2013 with planned maintenance capital expenditures currently at $15 million. This is down significantly from total capital expenditures of $115 million in 2011 and $112 million in 2012. Subsequent to quarter end, the Company paid down $5 million on the $10 million HSBC demand note issued in 2012. The Company anticipates paying down the remaining $5 million by the April 30, 2013 due date.
  • Xtreme recognized an impairment loss on the prototype XSR unit 111 during the fourth quarter of $3.1 million. This relates to the sale of the unit to a group overseas. The sale closed in February 2013. It was required that the Company move the asset to available for sale, as it was contracted at year end. Additionally, the Company recognized approximately $2 million in additional depreciation expense in the fourth quarter related to a change in accounting estimate for depreciation of spares.

Selected Quarterly Financial Information

Three months ended Dec 31, 2012 Sep 30, 2012   Jun 30, 2012   Mar 31, 2012
Revenue 50,376 47,658   38,851   37,265
Adjusted EBITDA 14,803 10,259   7,168   7,535
Adjusted EBITDA as a percentage of Revenue 29 22   18   20
Adjusted EBITDA per share 1 - basic ($) 0.18 0.16   0.11   0.11
Net income (loss) 4,430 (3,744 ) (2,603 ) 930
Net income (loss) per share - basic ($) 0.05 (0.06 ) (0.04 ) 0.01
Capital assets 408,573 418,628   418,371   372,834
Total assets 494,142 501,945   502,868   455,505
Cash 5,177 18,397   6,979   3,481
Debt, including operating line 146,922 138,156   151,018   117,490
Operating days 1,891 1,742   1,494   1,423
Utilization % - Drilling Services 85 86   74   84
Utilization % - Coil Services 47 36   57   56
Utilization % - Total 77 74   70   79
Weighted average rigs in service 26.8 26.0   23.4   19.8
Total rigs, end of quarter 27 26   25   22

Excerpt from Management''s Discussion and Analysis for the twelve months ended December 31, 2012

Outlook

Xtreme Drilling and Coil Services Corp. was founded with the mission of redefining what is possible in oil and gas exploration and production, through a fierce dedication to driving innovation. Since 2005, Xtreme has introduced numerous breakthrough technologies for both drilling and coiled tubing services. These advancements have enabled Xtreme to consistently set new performance benchmarks within the industry.

In 2012, Xtreme put that technology to work on a far greater scale than ever before. With the completion of an aggressive capital expansion program, the company dramatically grew the fleet of XDR drilling rigs and XSR coiled tubing units-nearly doubling its size in a span of 18 months.

At December 31, 2012 Xtreme had 19 of 21 XDR drilling rigs and 4 of 7 XSR coiled tubing units working. As previously announced, the 20th XDR drilling rig went to work during the first week of 2013. The final new-build XDR rig went to work in October of 2012 and thus marked the end of the ambitious capital expansion program. The total capital spend was over $200 million and included eight XDR 500 rigs, three conversions of XDR 400 rigs to XDR 500 rigs and five new large diameter coiled tubing units. 

Xtreme now operates one of the youngest high specification fleets in the land drilling industry, with an average age of less than three years old. The company believes the fleet is ideally suited to excel in today''s major North American oil and natural gas liquids resource plays. Accordingly, all of these tier 1 new-build rigs were contracted to operators in the Bakken/Three Forks play in North Dakota and the DJ Basin/Niobrara play in Colorado. The company expects this focus on oil and liquids-rich gas production will increase utilization, day rates, and returns relative to competitors in the years to come.

Xtreme began 2012 with three XSR coiled tubing units-two operating in Saudi Arabia, where they perform deep horizontal re-entry drilling. In 2012 the company grew the XSR coiled tubing service offering with the addition of five new-build units. With the deepest reach in the marketplace and a proprietary AC electric technology, the newest XSR units enable operators in North American resource plays to go deeper with their wells and as such realize higher initial production rates and ultimate recoveries. Two of the XSR units are currently working in the Eagle Ford shale of South Texas. These units are primarily performing post-frac plug mill outs and pre-frac well preps. However, this technology also has exciting potential as the market for new fracing technology grows.

Today, Xtreme is at an important inflection point. As production continues to soar in US resource plays, the substantial investment in fleet expansion and R&D gives Xtreme a strong platform to capitalize upon as the company embarks on the current initiative: optimizing operations to realize the full potential of the expanded fleet. With the bold expansion of the past 18 months complete for now, the company is transitioning to focused execution.

The initial improvement in operating performance was evidenced throughout the second half of 2012. Adjusted EBITDA margins hit a low point in the second quarter of 2012 at 18.5% and increased to 29.2% by the fourth quarter of the year. The company anticipates that continued efforts to improve operations can result in margins that are consistently near the upper end of the industry range. Additionally, the company is working to move additional rigs into the Middle East market where there is a strong performance track record. It is anticipated that the two idle XSR units in the Eagle Ford will begin operations in Q2 and Q3 2013 respectively.

Finally, the company is committed to increasing free cash flow and reducing leverage, which was utilized primarily to finance the aggressive growth of the past 18 months. With planned maintenance capex of $15 million in 2013 the company anticipates being able to significantly decrease debt over the course of the year.



Xtreme Drilling and Coil Services Corp.
 
Formerly known as Xtreme Coil Drilling Corp.  
Consolidated Statements of Financial Position  
(in thousands of Canadian dollars)  
           
  Dec 31, 2012   Dec 31, 2011   Jan 1, 2011  
Assets            
Current assets            
  Cash and cash equivalents 5,177   5,892   2,994  
  Accounts receivable 43,669   45,353   37,083  
  Other receivables 35   1,906   2,200  
  Assets held for sale 9,308   -   -  
  Prepaid expenses and other 2,021   2,090   2,551  
  Income tax recoverable 391   934   1,967  
  Inventory 5,746   5,863   5,402  
  66,347   62,038   52,197  
Non-current assets            
Deferred tax asset 15,002   7,566   4,265  
Property and equipment 408,573   341,198   233,193  
Intangible assets 4,220   4,523   4,793  
Total Assets 494,142   415,325   294,448  
             
Liabilities and Shareholders'' Equity            
Current liabilities            
  Bank indebtedness 7,834   -   8,317  
  Accounts payable and accrued liabilities 26,642   26,175   10,097  
  Current portion of long-term debt 13,361   500   12,224  
  47,837   26,675   30,638  
Long-term liabilities            
Long-term debt 125,727   80,937   18,952  
Total Liabilities 173,564   107,612   49,590  
             
Shareholders'' equity            
Share capital 327,197   310,296   253,765  
Share option reserve 11,572   10,338   8,585  
Accumulated deficit (5,312 ) (4,325 ) (4,496 )
Foreign currency translation reserve (12,879 ) (8,596 ) (12,996 )
Total Shareholders'' Equity 320,578   307,713   244,858  
Total Liabilities and Shareholders'' Equity 494,142   415,325   294,448  
             
             
Xtreme Drilling and Coil Services Corp.
Formerly known as Xtreme Coil Drilling Corp.
Consolidated Statements of (Loss) Income
For the years ended December 31, 2012 and 2011
 
(in thousands of Canadian dollars, except share and per share data)  
         
  2012   2011  
Revenue 174,150   103,982  
         
Expenses        
  Operating expenses 125,528   74,742  
  General and administrative expenses 9,147   9,622  
  Depreciation of property and equipment 26,975   11,991  
  Amortization of intangibles 303   304  
  Stock-based compensation 1,229   1,826  
  Foreign exchange (gain) loss (1,792 ) 1,790  
  Loss on sale of equipment 257   159  
  Impairment of accounts receivable 6,235   -  
  Impairment of assets held for sale 3,133   -  
  Loss on damage of property and equipment 538   -  
  Other income (expense) 175   (43 )
  Interest expense 7,919   2,532  
(Loss) Income before tax for the year (5,497 ) 1,059  
         
Tax expense (recovery)        
  Current 2,666   2,571  
  Deferred (7,176 ) (1,683 )
Total tax (recovery) expense (4,510 ) 888  
         
Net (loss) income for the year (987 ) 171  
         
Net (loss) income per common share        
  - basic (0.01 ) 0.00  
  - diluted (0.01 ) 0.00  
         
Weighted average number of        
common shares    
  - basic 69,618,457   60,481,719  
  - diluted 69,759,835   61,298,859  
         
   
Xtreme Drilling and Coil Services Corp.
Formerly known as Xtreme Coil Drilling Corp.
Consolidated Statements of Comprehensive (Loss) Income
For the years ended December 31, 2012 and 2011
(in thousands of Canadian dollars)
       
     
2012   2011
Net (loss) income for the year (987 ) 171
Other comprehensive (loss) income      
  Unrealized (loss) gain on translating financial statements of foreign operations (4,283 ) 4,400
       
Comprehensive (loss) income for the year (5,270 ) 4,571
       
     
Xtreme Drilling and Coil Services Corp  
Formerly known as Xtreme Coil Drilling Corp.  
Consolidated Statements of Changes in Shareholders'' Equity
For the years ended December 31, 2012 and 2011
 
(in thousands of Canadian dollars)      
  Share capital   Share option reserve   Accumulated deficit   Foreign currency translation reserve   Total shareholders'' equity  
Balance at January 1, 2011 253,765   8,585   (4,496 ) (12,996 ) 244,858  
Net income for the year -   -   171   -   171  
Other comprehensive income                    
Currency translation differences -   -   -   4,400   4,400  
Total comprehensive income -   -   171   4,400   4,571  
                     
Employee share option scheme:                    
Value of employees services 133   1,867   -   -   2,000  
Proceeds from shares issued 56,398   (114 ) -   -   56,284  
Total transactions with owners 56,531   1,753   -   -   58,284  
Balance at December 31, 2011 310,296   10,338   (4,325 ) (8,596 ) 307,713  
                     
Balance at January 1, 2012 310,296   10,338   (4,325 ) (8,596 ) 307,713  
Net loss for the year -   -   (987 ) -   (987 )
Other comprehensive loss                    
Currency translation differences -   -   -   (4,283 ) (4,283 )
Total comprehensive loss -   -   (987 ) (4,283 ) (5,270 )
                     
Employee share option scheme:                    
Value of employee services 105   1,339   -   -   1,444  
Proceeds from shares Issued, net of share issue costs 16,796   (105 ) -   -   16,691  
Total transactions with owners 16,901   1,234   -   -   18,135  
Balance at December 31, 2012 327,197   11,572   (5,312 ) (12,879 ) 320,578  
                     

Xtreme Drilling and Coil Services Corp.
Formerly known as Xtreme Coil Drilling Corp.
Consolidated Statements of Cash Flows
For the years ended December 31, 2012 and 2011
 
(in thousands of Canadian dollars)  
  2012   2011  
Cash flow provided by (used in):        
Operating activities        
Net (loss) income for the year (987 ) 171  
Items not affecting cash:        
  Depreciation and amortization 27,278   12,295  
  Stock-based compensation 1,229   1,826  
  Loss on sale of equipment 257   159  
  Interest expense 6,963   2,326  
  Amortization of debt issuance costs 966   206  
  Unrealized foreign exchange (gain) loss (1,792 ) 1,790  
  Deferred tax (recovery) expense (7,176 ) 1,683  
  Impairment on accounts receivable 6,235   -  
  Loss on damage 538   -  
  Impairment on assets held for sale 3,133   -  
  Interest paid (6,491 ) (1,534 )
  Changes in items of working capital (1,692 ) 8,343  
Net cash generated from operating activities 28,461   27,265  
Financing activities        
Proceeds from shares issued, net of issue costs 16,192   55,304  
Proceeds from exercise of stock options 255   783  
Proceeds from long-term debt 66,260   145,490  
Repayment of long-term debt (5,466 ) (95,963 )
Proceeds from (repayment of) operating facility 7,834   (8,317 )
Debt issuance cost (1,459 ) (1,070 )
  Net cash generated from financing activities 83,616   96,227  
Investing activities        
Proceeds from sale of equipment 681   478  
Capital expenditures (112,260 ) (115,340 )
Increase in intangibles -   (34 )
  Net cash used in investing activities (111,579 ) (114,896 )
Effect of exchange rate changes on cash and cash equivalents (1,213 ) (5,698 )
         
(Decrease) Increase in cash and cash equivalents (715 ) 2,898  
Cash and cash equivalents - beginning of year 5,892   2,994  
         
Cash and cash equivalents - end of year 5,177   5,892  
         




Adjusted EBITDA
For the three and twelve months ended December 31, 2011 and 2010
 
(in thousands of Canadian dollars)  
  Three months ended   Twelve months ended  
  Dec 31, 2012   Dec 31, 2011   Dec 31, 2012   Dec 31, 2011  
Net income (loss) 4,430   (1,092 ) (987 ) 171  
Tax (recovery) expense (6,699 ) 1,400   (4,510 ) 888  
Interest expense 2,305   963   7,919   2,532  
Loss on sale of equipment 114   212   257   159  
Other expense (income) 175   (1 ) 175   (43 )
Loss on damage -   -   538   -  
Impairment of accounts receivable -   -   6,235   -  
Impairment on sale of rig 3,133   -   3,133   -  
Foreign exchange loss (gain) 935   (1,153 ) (1,792 ) 1,790  
Stock-based compensation 70   278   1,229   1,826  
Amortization of intangibles 75   76   303   304  
Depreciation of property and equipment 9,975   3,655   26,975   11,991  
  14,513   4,338   39,475   19,618  
Non-recurring items:                
  Inventory adjustments 291   1,091   291   1,442  
  Other -   716   -   829  
Adjusted EBITDA 14,804   6,145   39,766   21,889  
Adjusted EBITDA per share ($) 0.18   0.09   0.57   0.36  
                 

Reader Advisory

This news release, or documents incorporated herein, contains forward-looking statements ("FLS"). More particularly, this news release contains statements that may relate to contracting, marketing, financing, construction, modifications, deployment, operation, utilization of drilling rigs in the Company''s current and future fleet, and any potential outcome relating to claims and litigation. Further, the FLS herein may relate to trade credit insurance carried by the Company to mitigate receivables collection risk. Although Xtreme believes expectations reflected in these FLS are reasonable, readers should not place undue reliance on them because Xtreme can give no assurance they will prove to be correct. There are many factors that could cause FLS not to be correct, including risks and uncertainties inherent in the Company''s business.

These statements are based on certain factors and assumptions including, but not limited to: the assessment of current and projected future operations; ongoing and future strategic business alliances, negotiations and opportunities to enter new, extend or complete existing contracts; the availability and cost of financing; foreign currency exchange rates; timing and magnitude of capital expenditures; expenses and other variables affecting rig operation, modification and construction; the ability and commitment of vendors to provide rig component equipment, services and supplies, including labor, in a cost-effective and timely manner; the issuance of applied-for patents; changes in tax rates; and government regulations. Although Xtreme considers the assumptions used to prepare this news release reasonable, based on information available to management as of March 6, 2013, ultimately the assumptions may prove to be incorrect.

Forward-looking statements are also subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from management''s current expectations. These factors include, but are not limited to: the cyclical nature of drilling market demand, foreign currency exchange rates, and commodity prices; access to credit and to equity markets; the availability of qualified personnel; vendor-provided rig components; and, competition for customers.

Management''s assumptions considered the following: compliance with the terms of the Company''s current and proposed new credit facility; ongoing access to key supplies and components required to continue operating and maintaining equipment, including fuel; continued successful performance of drilling and related equipment; expectations regarding gross margin; recruitment and retention of qualified personnel; continuation or extension of existing long-term or multi-well contracts; revenue expectations related to shorter-term drilling opportunities; willingness and ability of customers to remit amounts owing to Xtreme in accordance with normal industry practices; and management of accounts receivable in direct relation to revenue generation.

In preparing this news release, management considered the following risk factors: fluctuations in crude oil and natural gas prices, supply and demand; fluctuation in foreign currency exchange and interest rates; financial stability of Xtreme''s customers; current and future applications for Xtreme''s proprietary technology; competition from other drilling contractors; regulatory and economic conditions in regions where Xtreme operates; environmental constraints; changes to government legislation; international trade barriers or restrictions; and, where appropriate, global political and military events.

Financial outlook information contained in this news release about prospective results of operations, financial position or cash provided by operating activities is based on assumptions about future events, including economic conditions and proposed courses of action, and on management''s assessment of relevant information currently available. Readers are cautioned such financial outlook information contained in this news release is not appropriate for purposes other than for which it is disclosed here. Readers should not place undue importance on FLS and should not rely on this information as of any other date. Except as required pursuant to applicable securities laws, Xtreme disclaims any intention, and assumes no obligation, to update publicly or revise FLS to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such FLS or otherwise.

About Xtreme

Xtreme Drilling and Coil Services Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification drilling rigs and coiled tubing well service units featuring leading-edge proprietary technology including AC high capacity coil injectors, deep re-entry drilling capability, modular transportation systems and continuous integration of in-house advances in methodologies.

Currently Xtreme operates two service lines: Drilling Services (XDR) and Coil Services (XSR) under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada, the United States and Saudi Arabia. For more information about the Company, please visit www.xtremecoil.com.

Contact:
Xtreme Drilling and Coil Services Corp.
Matt Porter
Chief Financial Officer
+1 281 994 4604
Xtreme Drilling and Coil Services Corp.
16285 Park Ten Place, Suite 650
Houston, TX 77084
ir@xtremecoil.com
www.xtremecoil.com

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