DATE: November 9, 2023
STAMPEDE DRILLING INC. ANNOUNCES 2023 RECORD BREAKING THIRD QUARTER RESULTS
CALGARY, ALBERTA – Stampede Drilling Inc. (“Stampede” or the “Corporation”) (TSX-V: SDI) announces today its consolidated financial and operational results for the three and nine month periods ended September 30, 2023.
The following press release should be read in conjunction with the December 31, 2022 audited consolidated financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”), December 31, 2022 annual MD&A and the annual information form (“AIF”) for the year ended December 31, 2022, as well as the condensed unaudited consolidated interim financial statements and notes for the three and nine month periods ended September 30, 2023 and 2022. Additional information regarding Stampede, including the AIF, is available on SEDAR at www.sedarplus.ca.
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.
Estimates and forward-looking information are based on assumptions of future events and actual results may vary from these estimates. See “Forward-Looking Information” in this press release for additional details.
Third QUARTER 2023 Operational HIGHLIGHTS
For the three months ended September 30, 2023, the Corporation recorded the following record-breaking third quarter results since inception:
- Revenue for the three month period ended September 30, 2023 was $25,520, up $4,798 (23%) compared to $20,722 for the corresponding 2022 period.
- Adjusted EBITDA for the three month period ended September 30, 2023 was $6,201 up $1,218 (24%) compared to $4,983 for the corresponding 2022 period.
- Net income for the three month period ended September 30, 2023 was $3,559 up $694 (24%) compared to a net income of $2,865 for the corresponding 2022 period.
- Free cash flow for the three month period ended September 30, 2023 was $4,168 up $2,296 (123%) compared to $1,872 for the corresponding 2022 period.
The Corporation’s results were driven by both higher operating days and higher revenue per day. The higher revenue per day was primarily due to increased field labour costs which were passed through to our customers. Total operating days in the quarter were 978, up 156 (19%) from the 822 operating days in the corresponding period of 2022. The increase in operating days was the result of the Corporation crewing and contracting the rigs acquired throughout 2022 in 2023. The Corporation currently has 19 marketable rigs which includes a high spec triple purchased in August 2022.
During Q3 2023, the Corporation entered into a new $50,000 syndicated credit agreement. Under the Credit Agreement, which has an initial term of three years, the Corporation will have an available limit of $20,000 under a non-revolving term loan, $15,000 under a revolving credit facility and $15,000 under an additional revolving credit facility.
The Corporation repurchased 3,838 shares at an average share price of $0.25 during the three months ended September 30, 2023, as part of its previously announced NCIB on June 7, 2022.
OUTLOOK
Stampede is anticipating continued commodity volatility throughout the remainder of 2023 due to current macroeconomic influences, including the impact of the Russian invasion of Ukraine, and the Isreali Palestine conflict. Despite the anticipated volatility, Stampede is forecasting to continue its strong utilization and day rates for its fleet of 19 rigs for the remainder of 2023 and into 2024. Access to qualified field labour will continue to be an industry wide challenge for the remainder of 2023, however management has proven their ability to attract and crew qualified field hands since Stampede’s inception.
Stampede ended Q3 2023 with a debt to EBITDA of under 1x and will continue to focus on maintaining its strong balance sheet and corresponding low debt levels. The Corporation will continue to align all levels of compensation and G&A spending to ensure shareholder value and alignment.
The Corporation will continue to assess capital allocations on its normal course issuer bid, acquisition opportunities and capital expenditures to further enhance customer desirability of its current fleet in 2023.
FINANCIAL SUMMARY
| Three months ended, September 30 | Nine months ended, September 30 | |||||
| (000’s CAD $ except per share amounts) | 2023 | 2022 | % Change | 2023 | 2022 | % Change |
| Revenue | 25,520 | 20,722 | 23% | 64,462 | 43,642 | 48% |
| Direct operating expenses | 17,069 | 13,932 | 23% | 43,934 | 29,497 | 49% |
| Gross margin (1) | 8,451 | 6,790 | 24% | 20,528 | 14,145 | 45% |
| Net income | 3,559 | 2,865 | 24% | 7,265 | 4,727 | 54% |
| Basic and diluted income per share | 0.02 | 0.02 | 0% | 0.03 | 0.03 | 0% |
| Adjusted EBITDA (1) | 6,201 | 4,983 | 24% | 14,193 | 9,568 | 48% |
| Funds from operating activities | 6,203 | 4,404 | 41% | 14,144 | 8,945 | 58% |
| Free cash flow(1) | 4,168 | 1,872 | 123% | 5,799 | 1,216 | 377% |
| Weighted average common shares outstanding (000’s) | 227,561 | 168,187 | 35% | 226,984 | 144,313 | 57% |
| Weighted average diluted common shares outstanding (000’s) | 228,931 | 183,095 | 25% | 229,753 | 159,231 | 44% |
| Capital expenditures | 2,681 | 24,933 | (89%) | 9,637 | 36,602 | (74%) |
| Number of marketed rigs | 19 | 19 | 0% | 19 | 19 | 0% |
| Drilling rig utilization(2) | 56% | 68% | (12%) | 46% | 59% | (13%) |
| CAOEC industry average utilization(3) | 33% | 40% | (6%) | 34% | 34% | 0% |
DESCRIPTION OF STAMPEDE’S BUSINESS
Stampede is an energy services company that provides premier contract drilling services in Western Canada. Stampede operates a fleet of 18 telescopic double drilling rigs and 1 high spec triple drilling rig suited for most formations within the Western Canadian Sedimentary Basin (“WCSB”). The Corporation’s head office is located in Calgary, Alberta with operations based out of Nisku, Alberta and Estevan, Saskatchewan. The Corporation’s common shares trade on the TSX Venture Exchange under the symbol “SDI”.
RESULTS FROM OPERATIONS FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2023
| Nine months ended, September 30 | |||||
| (000’s CAD $ ) | 2023 | 2022 | % Change | ||
| Revenue | 64,462 | 43,642 | 48% | ||
| Direct operating expenses | 43,934 | 29,497 | 49% | ||
| Gross margin(1) | 20,528 | 14,145 | 45% | ||
| Gross margin %(1) | 32% | 32% | 0% | ||
| Net income | 7,265 | 4,727 | 54% | ||
| General and administrative expenses | 7,574 | 4,874 | 55% | ||
| Adjusted EBITDA(1) | 14,193 | 9,568 | 48% | ||
| Drilling rig operating days(2) | 2,404 | 1,807 | 33% | ||
| Drilling rig revenue per day(3) | 26.8 | 24.2 | 11% | ||
| Drilling rig utilization(4) | 46% | 59% | (13%) | ||
| CAOEC industry average utilization(5) | 34% | 34% | 0% | ||
| (1) Refer to “Non-GAAP and Other Financial Measures” for further information. (2) Defined as contract drilling days, between spud to rig release (3) Drilling rig revenue per day is calculated by revenue divided by drilling rig operating days (4) Drilling rig utilization is calculated based on operating days (spud to rig release) (5) Source: The Canadian Association of Energy Contractors (“CAOEC”) monthly Contractor Summary. The CAOEC industry average is based on Operating Days divided by total available drilling days. |
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- Revenue of $64,462 – an increase of $20,820 (48%) from $43,642 compared to the corresponding 2022 period. The increase was primarily related to the addition of nine drilling rigs to the Corporation’s fleet throughout 2022 that increased number of operating days and increased day rate from the flow through field labour charges to our customers.
- Operating days of 2,404 – an increase of 597 operating days (33%) from 1,807 operating days compared to the corresponding 2022 period. Operating days increased primarily as a result of the increase in rig count compared to the prior period. Drilling rig utilization for the nine month period ended September 30, 2023 was 46%, which was a 13% decrease from 59% compared to the corresponding 2022 period due to the lower utilization for the nine drilling rigs acquired in 2022, and 12% higher than the CAOEC industry average utilization rate of 34% for the nine month period ended September 30, 2023.
- Gross margin percentage of 32% – remain the same at 32% as compared to the corresponding 2022 period. The gross margin was impacted by higher rig operating expenses due to inflationary pressures and labour costs, and offset by the increase in revenue per day.
- Adjusted EBITDA of $14,193 – an increase of $4,625 (48%) from $9,568 compared to the corresponding 2022 period. The increase is primarily related to increased operating days and increased revenue per day and partially offset by higher operating expenses and general and administrative expenses.
- Net income of $7,265 – an increase of $2,538 (54%) from $4,727 compared to the corresponding 2022 period. The increase is primarily related to increased operating days and revenue per day and partially offset by higher operating expenses, general and administrative expenses, and finance costs.
- General and administrative expenses of $7,574 – an increase of $2,700 (55%) from $4,874 compared to the corresponding 2022 period. The increase is primarily related to the Corporation’s increased headcount and administration expenses due to the increased activity levels.
RESULTS FROM OPERATIONS FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2023
| Three months ended, September 30 | |||||
| (000’s CAD $) | 2023 | 2022 | % Change | ||
| Revenue | 25,520 | 20,722 | 23% | ||
| Direct operating expenses | 17,069 | 13,932 | 23% | ||
| Gross margin(1) | 8,451 | 6,790 | 24% | ||
| Gross margin %(1) | 33% | 33% | 0% | ||
| Net income | 3,559 | 2,865 | 24% | ||
| General and administrative expenses | 2,711 | 1,897 | 43% | ||
| Adjusted EBITDA(1) | 6,201 | 4,983 | 24% | ||
| Drilling rig operating days(2) | 978 | 822 | 19% | ||
| Drilling rig revenue per day(3) | 26.1 | 25.2 | 4% | ||
| Drilling rig utilization(4) | 56% | 68% | (12%) | ||
| CAOEC industry average utilization(5) | 33% | 40% | (7%) | ||
| (1) Refer to “Non-GAAP and Other Financial Measures” for further information. (2) Defined as contract drilling days, between spud to rig release (3) Drilling rig revenue per day is calculated by revenue divided by drilling rig operating days (4) Drilling rig utilization is calculated based on operating days (spud to rig release) (5) Source: The Canadian Association of Energy Contractors (“CAOEC”) monthly Contractor Summary. The CAOEC industry average is based on Operating Days divided by total available drilling days. |
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- Revenue of $25,520 – an increase of $4,798 (23%) from $20,722 compared to the corresponding 2022 period. The increase was primarily related to the addition of six drilling rigs to the Corporation’s fleet throughout 2022, combined with increased revenue per day and flow through field labour charges to our customers.
- Operating days of 978 – an increase of 156 operating days (19%) from 822 operating days compared to the corresponding 2022 period. Operating days increased as a result of the increase in rig count compared to the prior period. Drilling rig utilization for the three month period ended September 30, 2023 was 56%, which was a 12% decrease from 68% compared to the corresponding 2022 period and 23% higher than the CAOEC industry average utilization rate of 33% for the three month period ended September 30, 2023.
- Gross margin percentage of 33% – remained the same at 33% as compared to the corresponding 2022 period. The gross margin was impacted by higher rig operating expenses due to inflationary pressures and labour costs, and offset by the increase in revenue per day.
- Adjusted EBITDA of $6,201 – an increase of $1,218 (24%) from $4,983 compared to the corresponding 2022 period. The increase is primarily related to increased operating days and increased revenue per day and partially offset by higher operating expenses and general and administrative expenses.
- Net income of $3,559 – an increase of $694 (24%) from net income of $2,865 compared to the corresponding 2022 period. The increase is primarily related to increased operating days and revenue per day and partially offset by higher operating expenses, general and administrative expenses, and finance costs.
- General and administrative expenses of $2,711 – an increase of $814 (43%) from $1,897 compared to the corresponding 2022 period. The increase is primarily related to increased headcount and administration expenses due to the increased activity levels.
NON-GAAP AND OTHER FINANCIAL MEASURES
This MD&A contains references to (i) adjusted EBITDA, (ii) Gross margin (iii) Gross margin percentage (iv) Working capital (excluding debt), and (v) free cash flow. These financial measures are not measures that have any standardized meaning prescribed by IFRS and are therefore referred to as non-GAAP (Generally Accepted Accounting Principles) measures. The non-GAAP measures used by the Corporation may not be comparable to similar measures used by other companies.
- Adjusted EBITDA – is defined as “income from operations before interest income, interest expense, taxes, transaction costs, depreciation and amortization, share-based compensation expense, gains on asset disposals, impairment expenses, other income, foreign exchange, non-recurring restructuring charges, finance costs, accretion of debentures and other income/expenses, foreign exchange gain and any other items that the Corporation considers appropriate to adjust given the irregular nature and relevance to comparable operations.” Management believes that in addition to net income, adjusted 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 assets are depreciated, amortized and impaired, the impact of foreign exchange, or how the results are affected by the accounting standards associated with the Corporation’s stock-based compensation plan. Investors should be cautioned, however, that adjusted EBITDA should not be construed as an alternative to net income determined in accordance with IFRS as an indicator of the Corporation’s performance. The Corporation’s method of calculating adjusted EBITDA may differ from that of other organizations and, accordingly, its adjusted EBITDA may not be comparable to that of other companies.
| Three months ended, September 30 | Nine months ended, September 30 | ||||||
| (000’s CAD $) | 2023 | 2022 | % Change | 2023 | 2022 | % Change | |
| Net income | 3,559 | 2,865 | 24% | 7,265 | 4,727 | 54% | |
| Depreciation | 1,821 | 1,169 | 56% | 5,179 | 3,325 | 56% | |
| Finance costs | 569 | 387 | 47% | 1,471 | 796 | 85% | |
| Other income | (12) | (2) | 500% | (15) | (9) | 67% | |
| (Gain) loss on asset disposal | (80) | 3 | (2,767%) | (646) | 3 | (21,633%) | |
| Share-based payments | 355 | 29 | 1,124% | 918 | 144 | 538% | |
| Transaction costs | – | 569 | (100%) | 29 | 595 | (95%) | |
| Foreign exchange (gain) | (11) | (37) | (70%) | (8) | (13) | (38%) | |
| Adjusted EBITDA | 6,201 | 4,983 | 24% | 14,193 | 9,568 | 48% | |
- Gross margin – is defined as “Income from operations before depreciation of property and equipment”. Gross margin is a measure that provides shareholders and potential investors additional information regarding the Corporation’s cash generating and operating performance. Management utilizes this measure to assess the Corporation’s operating performance. Investors should be cautioned, however, that gross margin should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of the Corporation’s performance. The Corporation’s method of calculating gross margin may differ from that of other organizations and, accordingly, its gross margin may not be comparable to that of other companies.
- Gross margin percentage – is calculated as gross margin divided by revenue. The Corporation believes gross margin as a percentage of revenue is an important measure to determine how the Corporation is managing its revenues and corresponding cost of sales. The Corporation’s method of calculating gross margin percentage may differ from that of other organizations and, accordingly, its gross margin percentage may not be comparable to that of other companies.
The following table reconciles the Corporation’s income from operations, being the most directly comparable financial measure disclosed in the Corporation’s interim financial statements, to gross margin:
| Three months ended, September 30 | Nine months ended, September 30 | ||||||
| (000’s CAD $) | 2023 | 2022 | % Change | 2023 | 2022 | % Change | |
| Income from operations | 6,736 | 5,682 | 19% | 15,670 | 10,973 | 43% | |
| Depreciation of property and equipment | 1,715 | 1,108 | 55% | 4,858 | 3,172 | 53% | |
| Gross margin | 8,451 | 6,790 | 24% | 20,528 | 14,145 | 45% | |
| Gross margin % | 33% | 33% | 0% | 32% | 32% | 0% | |
- Working capital (excluding debt) – is calculated based on total current assets less total current liabilities excluding current debt. The Corporation monitors working capital and its liquidity position on an ongoing basis and manages liquidity risk by regularly evaluating capital and operating budgets, forecasting cash flows and maintaining a sufficient credit facility to meet financing requirements. The Corporation’s method of calculating working capital (excluding debt) may differ from that of other organizations and, accordingly, its working capital (excluding debt) measure may not be comparable to that of other companies.
| Working Capital (excluding debt) | September 30, 2023 | December 31, 2022 |
| Total current assets: | 20,119 | 14,926 |
| Total current liabilities | (10,901) | (19,753) |
| Add back current portion of debt | ||
| Demand Facility | – | 6,794 |
| Convertible debentures | – | 2,380 |
| Long term debt | 1,870 | 2,431 |
| Working capital (excluding debt) | 11,088 | 6,778 |
- Free cash flow – is calculated based on funds from operating activities less maintenance and sustaining capital, and interest and principal debt repayments. The Corporation uses this measure to assess the discretionary cash that management has to invest in growth capital, asset acquisitions, or return capital to shareholders. The Corporation’s method of calculating free cash flow may differ from that of other organizations and, accordingly, its free cash flow may not be comparable to that of other companies. The following table reconciles the Corporation’s funds from operating activities to free cash flow.
| Three months ended, September 30 | Nine months ended, September 30 | ||||||||||||||
| (000’s CAD $) | 2023 | 2022 | % Change | 2023 | 2022 | % Change | |||||||||
| Funds from operating activities | 6,203 | 4,404 | 41% | 14,144 | 8,945 | 58% | |||||||||
| Maintenance and sustaining capital | (1,446) | (2,032) | (29%) | (4,954) | (6,664) | (26%) | |||||||||
| Interest paid on Demand Facility | (212) | (126) | 68% | (565) | (276) | 105% | |||||||||
| BDC principal payments | – | (100) | (100%) | (1,500) | (300) | 400% | |||||||||
| Interest on BDC loan | – | (27) | (100%) | (91) | (71) | 28% | |||||||||
| Term Loan principal payments | (167) | (117) | 43% | (667) | (233) | 186% | |||||||||
| Interest on Term Loan | (210) | (130) | 62% | (568) | (184) | 209% | |||||||||
| Total free cash flow | 4,168 | 1,872 | 123% | 5,799 | 1,216 | 377% | |||||||||
The free cash flow table above does not include the one-time principal repayment relating to the amendment to the Term loan ($9,000), for both the three and nine months ended September 30, 2023.
SUPPLEMENTARY FINANCIAL MEASURES
The Corporation uses supplementary financial measures that are not defined terms under IFRS to provide useful supplemental financial information to investors.
- Capital Expenditures – management of the Corporation uses a breakdown of capital expenditures to assess the capital invested related to capital expenditures at a more detailed level. Capital expenditures have been split into three categories, asset acquisition, growth capital, and maintenance and sustaining capital. Asset acquisitions are the purchase of complete drilling rigs and related equipment from a third party. Growth capital are expenditures incurred for the purposes of upgrading existing equipment to improve operating efficiency and marketability of the asset. Maintenance and sustaining capital are expenditures related to maintaining the current operational efficiency of the asset. The following table shows the split of the three different types of capital expenditures. The Corporation’s method of calculating capital expenditures may differ from that of other organizations and, accordingly, its capital expenditures may not be comparable to that of other companies. The following table reconciles the Corporation’s total capital expenditures.
| Nine months ended, September 30 | |||
| (000’s CAD $) | 2023 | 2022 | % Change |
| Capital expenditures: | |||
| Growth capital | 4,683 | 29,938 | (84%) |
| Maintenance and sustaining capital | 4,954 | 6,664 | (26%) |
| Total capital expenditures | 9,637 | 36,602 | (74%) |
FORWARD-LOOKING INFORMATION
Certain statements contained in this MD&A constitute forward-looking statements or forward-looking information (collectively, “forward-looking information”). Forward-looking information relates to future events or the Corporation’s future performance. All information other than statements of historical fact is forward-looking information. The use of any of the words “anticipate”, “plan”, “contemplate”, “continue”, “estimate”, “expect”, “intend”, “propose”, “might”, “may”, “will”, “could”, “should”, “believe”, “predict”, and “forecast” are intended to identify forward-looking information.
This MD&A contains forward-looking information pertaining to, among other things: the Corporation’s performance; expectations associated with the Corporation’s outlook, including among other things, anticipated commodity pricing and the volatility thereof, expectations about industry activities, market conditions and corresponding rig utilization and day rates; plans, strategies and expectations regarding the Corporation’s balance sheet, debt levels and financial resiliency; the assessment of capital allocations to the NCIB, additional acquisition opportunities and capital expenditures by the Corporation; expectations regarding utilization and day rates and the anticipated profitability of the Corporation resulting therefrom; anticipated industry wide inflationary costs and supply chain constraints and the resulting impact on the profitability of the Corporation; the Corporation’s liquidity and capital resource needs; expectations regarding the alignment of compensation and G&A spending; the expected effects of seasonality and weather on the Corporation’s operations and business; expectations regarding the management of the Corporation’s liquidity risk; expected future contractual commitments; the Corporation’s treatment and categorization of doubtful accounts and expectations regarding credit loss rates based on its past experiences and expectations in respect of certain receivables; expectations relating to credit risk; the Corporation’s assessment of its customers’ creditworthiness; anticipations regarding the collection of outstanding accounts receivables balances; and the Corporation’s expectations relating to market risk.
Forward-looking information is based on certain assumptions that Stampede has made in respect thereof as at the date of this MD&A regarding, among other things: the Corporation’s ability to fully crew and contract its rigs; the success of the measures implemented by the Corporation to ensure the safe, efficient and reliable operations at each of its drilling sites; the creditworthiness of the Corporation’s customers and counterparties; the effectiveness of the Corporation’s financial risk management policies at ensuring all payables are paid within the pre-agreed credit terms; that the Corporation has adequate access to its Demand Facility to provide the necessary liquidity needed to manage fluctuations in the timing of receipt and/or disbursement of operating cash flows; the belief that adjusted EBITDA, gross margin and gross margin percentage are useful supplemental financial measures; the ability of the Corporation to retain qualified staff; the ability of the Corporation to maintain key customers; the ability of the Corporation to obtain financing on acceptable terms; the belief that the Corporation’s principal sources of liquidity will be sufficient to service its debt and fund its operations and other strategic opportunities; the ability to protect and maintain the Corporation’s intellectual property; the Corporation’s ability to maintain financial resiliency in light of current macroeconomic conditions; and the regulatory framework regarding taxes and environmental matters in the jurisdictions in which the Corporation operates.
Forward-looking information is presented in this MD&A for the purpose of assisting investors and others in understanding certain key elements of the Corporation’s financial results and business plan, as well as the objectives, strategic priorities and business outlook of the Corporation, and in obtaining a better understanding of the Corporation’s anticipated operating environment. Readers are cautioned that such forward-looking information may not be appropriate for other purposes.
While Stampede believes the expectations and material factors and assumptions reflected in the forward-looking information is reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. Forward-looking information is not a guarantee of future performance and actual results or events could differ materially from the expectations of the Corporation expressed in or implied by such forward-looking information. Accordingly, readers should not place undue reliance on forward-looking information. All forward-looking information is subject to a number of known and unknown risks and uncertainties including, but not limited to: the condition of the global economy, including trade, inflation, the ongoing conflict in Ukraine as well as the Israeli Palestine conflict and other geopolitical risks; the condition of the crude oil and natural gas industry and related commodity prices; other commodity prices and the potential impact on the Corporation and the industry in which the Corporation operates, including levels of exploration and development activities; the impact of increasing competition; fluctuations in operating results; the ongoing significant volatility in world markets and the resulting impact on drilling and completions programs; foreign currency exchange rates; interest rates; labour and material shortages; cyber security risks; natural catastrophes; and certain other risks and uncertainties detailed under the heading “Risks and Uncertainties” herein and in the Corporation’s annual management’s discussion and analysis and annual information form, each dated March 16, 2023 for the year ended December 31, 2022, and from time to time in Stampede’s public disclosure documents available at www.sedarplus.ca.
This list of risk factors should not be construed as exhaustive. Readers are cautioned that events or circumstances could cause actual results to differ materially from those predicted, forecasted, or projected. Statements, including forward-looking information, are made as of the date of this MD&A and the Corporation does not undertake any obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. The forward-looking information contained in this MD&A is expressly qualified by this cautionary statement.
For further information, please contact:
Lyle Whitmarsh
President & Chief Executive Officer
Stampede Drilling Inc.
Tel: (403) 984-5042