AKITA Drilling Ltd. Releases Year-End Results

Press Release

CALGARY, March 5, 2019 – AKITA Drilling Ltd.’s net loss for the year ended December 31, 2018 was $15,939,000 (net loss of $0.65 per share (basic and diluted)) on revenue of $118,361,000 compared to a net loss of $39,177,000 or $2.18 loss per share (basic and diluted) on revenue of $71,198,000 in 2017. Included in the 2017 net loss is an asset decommissioning and impairment expense of $29,123,000 (after tax effect of $15,320,000 or $0.85 per share). Funds flow from operations for the current year was $14,306,000 compared to $6,607,000 in 2017, while net cash from operating activities for 2018 was ($8,494,000) compared to $5,074,000 in 2017.

On September 11, 2018, AKITA closed on its transformational acquisition of Xtreme Drilling Corp. (“Xtreme”), a TSX listed United States (“US”) based contract drilling company with a fleet of 13 high specification AC triple drilling rigs, operating throughout major resource plays of the US, plus spare equipment and real estate. With this acquisition, and the movement of three rigs from AKITA’s Canadian fleet to the US in 2018 in addition to the rig deployed in Q4 of 2017, AKITA’s fleet of rigs in the US has increased to 17 rigs. The Company is now well-balanced with 23 rigs in Canada and 17 in the US.

In Canada, the Company’s utilization for the year decreased to 33% in 2018 from 36% in 2017. Sentiment in the Canadian energy industry shifted from optimism in the first quarter of 2018 to pessimism in the fourth quarter of 2018. Regulated production cuts, pipeline access and political and regulatory uncertainty are all weighing heavily on the Canadian energy industry, which in turn is affecting drilling activity. There is still an oversupply of rigs in Canada and day rates remain low, despite improving to $31,354 per operating day in 2018 from $26,704 in 2017. Without a significant shift in demand for rigs or a reduction in the overall Canadian rig fleet, AKITA does not anticipate any significant price increases or activity increases in Canada in the near future.

On November 22, 2018, the Canadian Association of Oilwell Drilling Contractors (“CAODC”) released its 2019 industry drilling forecast, estimating 33% average rig utilization, up from the 29% actual average rig utilization in 2018, and estimating 6,962 wells in 2019, up from 6,911 in 2018. The 2018 forecast was based upon commodity price assumptions of US $58.75 per barrel for crude oil and CAD $2.00 per mcf for natural gas. Based on the CAODC forecast it would appear that 2019 will be very similar to 2018. Without improvements to the existing takeaway capacity in Canada, growth in the Canadian market may remain challenged. The Company’s focus in 2019 will be on reducing costs in its Canadian operations.

AKITA’s activity in the US, on a weighted average basis, calculated on the days that the rigs were owned by AKITA and physically in the US was 61% for 2018 and 79% for the three months ended December 31, 2018. In the US the Company is looking to 2019 with optimism. Demand for AKITA’s US rigs remains strong as AKITA’s culture of “best-in-class” operations permeates through its US division. At December 31, 2018, 15 of the Company’s 17 US rigs were operating and strong utilization is expected to continue through 2019. Together with ongoing evaluation of opportunities to move additional Canadian rigs to the US, synergy realization related to the Xtreme acquisition and a modest capital program will be the focus of AKITA in the US.

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