Financial Highlights
$ thousands, except shares, per | Three months ended | Six months ended | ||||||||||
Change | Change | Change | Change | |||||||||
2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |||||
FINANCIAL RESULTS | ||||||||||||
Revenue | ||||||||||||
Contract Drilling | 19,967 | 22,718 | (2,751) | (12 %) | 49,512 | 39,430 | 10,082 | 26 % | ||||
Production Services | 14,507 | 19,963 | (5,456) | (27 %) | 42,500 | 44,082 | (1,582) | (4 %) | ||||
34,474 | 42,681 | (8,207) | (19 %) | 92,012 | 83,512 | 8,500 | 10 % | |||||
Adjusted EBITDA(1) | 1,578 | 7,600 | (6,022) | (79 %) | 12,492 | 16,026 | (3,534) | (22 %) | ||||
Adjusted EBITDA margin (%)(1) | 5 % | 18 % | 14 % | 19 % | ||||||||
Net (loss) income | (1,625) | 2,664 | (4,289) | (161 %) | 3,044 | 6,103 | (3,059) | (50 %) | ||||
Net (loss) income margin (%)(2) | (5 %) | 6 % | (11 %) | 3 % | 7 % | (4 %) | ||||||
Capital expenditures | 15,344 | 12,682 | 2,662 | 21 % | 25,469 | 15,473 | 9,996 | 65 % | ||||
Per share information: | ||||||||||||
Weighted average number of |
518,754,823 |
509,786,609 | 518,539,926 | 509,459,831 | ||||||||
Weighted average number of |
518,754,823 |
523,123,662 | 534,949,670 | 520,768,461 | ||||||||
Adjusted EBITDA(1) per share - | $ | 0.00 | $ | 0.01 | $ | 0.02 | $ | 0.03 | ||||
Net income (loss) per share - basic | $ | (0.00) | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||
Net (loss) income per share - basic and diluted | $ | (0.00) | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||
$ thousands, except ratios | June 30, 2023 | December 31, 2022 | ||||||||||
FINANCIAL POSITION AND LIQUIDITY | ||||||||||||
Working capital (excluding debt)(1) | 21,038 | 35,942 | ||||||||||
Working capital (excluding debt) ratio(1) | 2.7:1 | 3.6:1 | ||||||||||
Total assets | 286,692 | 287,552 | ||||||||||
Total long-term debt (including current portion) | 41,064 | 43,004 | ||||||||||
Shareholders' equity | 212,301 | 210,381 | ||||||||||
(1) Please refer to the "Non-GAAP and Other Financial Measures" section for further information. | ||||||||||||
(2) Net (loss) income margin is a Non-GAAP Measure which is calculated as net (loss) income divided by total revenue. |
Working capital(1) (excluding debt) for
Highlights for the Three Months Ended
- Quarterly revenue of
$34.5 million , a decrease of$8.2 million (19%) compared to a record$42.7 million in Q2 2022. Revenue decreased$2.8 million (12%) in Q2 2023 for the Contract Drilling segment and$5.5 million (27%) for the Production Services segment compared to Q2 2022. Both the Contract Drilling and Production Services segments inCanada were affected by delayed activity due to theAlberta wildfires and wet weather conditions in May andJune 2023 with no similar conditions in Q2 2022. CWC estimates 3,448 operating hours or$3.1 million of lost revenue in the Production Services segment were due to the wildfires and wet weather conditions in Q2 2023. CWC also estimates 15 operating days or$0.5 million of lost revenue in the Contract Drilling segment were due to the wet weather conditions in Q2 2023. - Q2 2023 Adjusted EBITDA(1) of
$1.6 million , a decrease of$6.0 million (79%) compared to a record$7.6 million in Q2 2022. Q2 2023 Adjusted EBITDA was the third-highest Q2 in CWC's 19-year history. - Net loss of
$ 1.6 million , compared to net income of$2.7 million in Q2 2022. - During Q2 2023, 1,275,000 common shares (Q2 2022: nil) were purchased under the Normal Course Issuer Bid ("NCIB") and 1,395,500 were cancelled and returned to treasury.
(1) Please refer to the "Non-GAAP and Other Financial Measures" section for further information.
Highlights for the Six Months Ended
- Record revenue for the first six months of 2023 of
$92.0 million , an increase of$8.5 million (10%) compared to$83.5 million in the first six months of 2022. Revenue increased$10.1 million (26%) in the Contract Drilling segment and decreased$1.6 million (4%) for the Production Services segment compared to the first six months of 2022. - Adjusted EBITDA(1) for the first six months of 2023 of
$12.5 million , a decrease of$3.5 million (22%) compared to a record$16.0 million in the first six months of 2022. Adjusted EBITDA for the first six months of 2023 was the second-highest first-half results in the Company's 19-year history. - Net income of
$3.0 million , a decrease of$3.1 million (50%) compared to a record$6.1 million in the first six months of 2022. Net income for the first six months of 2023 was the second-highest first-half results in the Company's 19-year history. - During the first six months of 2023, 1,681,000 common shares (2022: nil) were purchased, cancelled and returned to treasury under the Normal Course Issuer Bid ("NCIB").
(1) Please refer to the "Non-GAAP and Other Financial Measures" section for further information.
Industry Overview
Average crude oil and natural gas prices
Three months ended | ||||||||
2023 | 2023 | 2022 | 2022 | 2022 | 2022 | 2021 |
| |
Crude oil | ||||||||
West Texas Intermediate (US$/bbl) | 73.19 | 76.13 | 82.65 | 91.55 | 108.41 | 94.29 | 77.19 | 70.56 |
Western Canadian Select (US$/bbl) | 60.38 | 56.36 | 54.48 | 70.95 | 93.05 | 81.49 | 60.44 | 57.64 |
Natural gas | ||||||||
AECO (C$/mcf) | 2.04 | 3.25 | 6.00 | 5.00 | 6.92 | 4.66 | 4.89 | 3.75 |
Source:
In
Corporate Overview
The Contract Drilling division operates under the trade name CWC Ironhand Drilling and is comprised of thirteen (13) electric triple drilling rigs with depth ratings from 3,600 to 7,600 metres and nine (9) telescopic double drilling rigs with depth ratings from 3,200 to 5,000 metres. All twenty-two (22) rigs have top drives, seventeen (17) have pad rig moving systems, nine (9) have 7,500 psi pumping systems, three (3) have carbon reduction bi-fuel capabilities, and two (2) have high line power capabilities. All of the drilling rigs are ideally suited for the most active depths for horizontal drilling in the
The Production Services division operates under the trade name CWC Well Services. With a fleet of 138 service rigs, CWC is one of
Results of Operations
Three months ended | Change | Change | Six months ended | Change | Change | |||
$ thousands, except per share | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % |
Revenue | 34,474 | 42,681 | (8,207) | (19 %) | 92,012 | 83,512 | 8,500 | 10 % |
Direct operating expenses | 26,851 | 30,262 | (3,411) | (11 %) | 66,673 | 57,575 | 9,098 | 16 % |
Gross margin (1) | 7,623 | 12,419 | (4,796) | (39 %) | 25,339 | 25,937 | (598) | (2 %) |
Selling and administrative | 6,045 | 4,819 | 1,226 | 25 % | 12,847 | 9,911 | 2,936 | 30 % |
Adjusted EBITDA(1) | 1,578 | 7,600 | (6,022) | (79 %) | 12,492 | 16,026 | (3,534) | (22 %) |
Stock based compensation | 300 | 231 | 69 | 30 % | 600 | 462 | 138 | 30 % |
Finance costs | 529 | 605 | (76) | (13 %) | 1,486 | 993 | 493 | 50 % |
Depreciation | 3,371 | 2,982 | 389 | 13 % | 6,977 | 5,908 | 1,069 | 18 % |
(Gain) loss on disposal of | (576) | 227 | (803) | (354 %) | (694) | 564 | (1,258) | (223 %) |
(Loss) income before income | (2,046) | 3,555 | (5,601) | (158 %) | 4,123 | 8,099 | (3,976) | (49 %) |
Deferred income tax | (421) | 891 | (1,312) | (147 %) | 1,079 | 1,996 | (917) | (46 %) |
Net (loss) income | (1,625) | 2,664 | (4,289) | (161 %) | 3,044 | 6,103 | (3,059) | (50 %) |
Net (loss) income per share | ||||||||
Basic and diluted | $ (0.00) | $ 0.01 | $ (0.01) | (100 %) | $ 0.01 | $ 0.01 | $ - | 0 % |
(1) Please refer to the "Non-GAAP and Other Financial Measures" section for further information. |
Contract Drilling –
$ thousands, except margins, | Three months ended | Change | Change | Six months ended | Change | Change | ||
2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |
Revenue | ||||||||
4,731 | 7,784 | (3,053) | (39 %) | 21,868 | 20,573 | 1,295 | 6 % | |
15,236 | 14,934 | 302 | 2 % | 27,644 | 18,857 | 8,787 | 47 % | |
19,967 | 22,718 | (2,751) | (12 %) | 49,512 | 39,430 | 10,082 | 26 % | |
Direct operating expenses | ||||||||
3,967 | 5,848 | (1,881) | (32 %) | 15,225 | 14,832 | 393 | 3 % | |
12,037 | 11,009 | 1,028 | 9 % | 22,106 | 13,769 | 8,337 | 61 % | |
16,004 | 16,857 | (853) | (5 %) | 37,331 | 28,601 | 8,730 | 31 % | |
Gross margin (1) | ||||||||
764 | 1,936 | (1,172) | (61 %) | 6,643 | 5,741 | 902 | 16 % | |
3,199 | 3,925 | (726) | (18 %) | 5,538 | 5,088 | 450 | 9 % | |
3,963 | 5,861 | (1,898) | (32 %) | 12,181 | 10,829 | 1,352 | 12 % | |
Gross margin percentage (1) | ||||||||
16 % | 25 % | n/a | (9 %) | 30 % | 28 % | n/a | 2 % | |
21 % | 26 % | n/a | (5 %) | 20 % | 27 % | n/a | (7 %) | |
20 % | 26 % | n/a | (6 %) | 25 % | 27 % | n/a | (2 %) | |
Total drilling rigs, end of period | ||||||||
7 | 7 | - | 0 % | 7 | 7 | - | 0 % | |
15 | 15 | - | 0 % | 15 | 15 | - | 0 % | |
22 | 22 | - | 0 % | 22 | 22 | - | 0 % | |
Revenue per operating day(2) | ||||||||
31 % | 25 % | |||||||
11 % | 9 % | |||||||
Drilling rig operating days | ||||||||
127 | 273 | (146) | (53 %) | 610 | 717 | (107) | (15 %) | |
348 | 398 | ( | (13 %) | 654 | 511 | 143 | 28 % | |
475 | 671 | (196) | (29 %) | 1,264 | 1,228 | 36 | 3 % | |
Drilling rig utilization %(3) | ||||||||
20 % | 43 % | n/a | (23 %) | 48 % | 57 % | n/a | (9 %) | |
29 % | 37 % | n/a | 8 % | 29 % | 24 % | n/a | 5 % | |
26 % | 39 % | n/a | (13 %) | 36 % | 36 % | n/a | 0 % |
(1) | Please refer to the "Non-GAAP and Other Financial Measures" section for further information. |
(2) | Revenue per operating day is calculated based on operating days (i.e. spud to rig release basis). New or inactive drilling rigs are added based on the first day of field service. |
(3) | Drilling rig utilization is calculated based on operating days (i.e. spud to rig release basis). Drilling rigs requiring their Level IV recertification, refurbishment or have been otherwise removed from service for greater than 90 days are excluded from the utilization calculation until their first day back in field service. |
Canadian Contract Drilling revenue of
Gross margin in the Canadian Contract Drilling segment was
Gross margin in the
Production Services –
$ thousands, except margins, | Three months ended | Change | Change | Six months ended | Change | Change | ||
2023 | 2022 | $ | % | 2023 | 2022 | $ | % | |
Revenue | 14,507 | 19,963 | (5,456) | (27 %) | 42,500 | 44,082 | (1,582) | (4 %) |
Direct operating expenses | 10,847 | 13,405 | (2,558) | (19 %) | 29,342 | 28,974 | 368 | 1 % |
Gross margin (1) | 3,660 | 6,558 | (2,898) | (44 %) | 13,158 | 15,108 | (1,950) | (13 %) |
Gross margin percentage (1) | 25 % | 33 % | n/a | (8 %) | 31 % | 34 % | n/a | (3 %) |
Service rigs, end of period | ||||||||
Active service rigs | 62 | 64 | (2) | (3 %) | 62 | 64 | (2) | (3 %) |
Inactive service rigs | 76 | 79 | (3) | (4 %) | 76 | 79 | (3) | (4 %) |
Total service rigs | 138 | 143 | (5) | (3 %) | 138 | 143 | (5) | (3 %) |
Revenue per hour | 9 % | 18 % | ||||||
Service rig operating hours | 15,718 | 23,356 | (7,638) | (33 %) | 44,256 | 54,192 | (9,936) | (18 %) |
Service rig utilization %(2) | 39 % | 57 % | n/a | (18 %) | 54 % | 65 % | n/a | (11 %) |
(1) | Please refer to the "Non-GAAP and Other Financial Measures" section for further information. |
(2) | In accordance with CAOEC methodology, service rig utilization is calculated based on 10 operating hours a day x number of days per quarter x 5 days a week divided by 7 days in a week to reflect maximum utilization available due to hours of service restrictions on rig crews. Service rigs requiring their 24,000-hour recertification, refurbishment, or have been otherwise removed from service for greater than 90 days are excluded from the utilization calculation until their first day back in field service. |
Production Services revenue of
Capital Expenditures
Three months ended | Change | Change | Six months ended | Change | Change | |||
$ thousands | 2023 | 2022 | $ | % | 2023 | 2022 | $ | % |
Capital expenditures | ||||||||
Contract drilling | 12,992 | 11,227 | 1,765 | 16 % | 21,815 | 13,129 | 8,686 | 66 % |
Production services | 2,352 | 1,455 | 897 | 62 % | 3,654 | 2,229 | 1,425 | 64 % |
Other equipment | - | - | - | - | 115 | (115) | (100 %) | |
15,344 | 12,682 | 2,662 | 21 % | 25,469 | 15,473 | 9,996 | 65 % | |
Growth capital | 11,255 | 9,994 | 1,261 | 13 % | 19,614 | 11,530 | 8,084 | 70 % |
Maintenance and infrastructure | 4,089 | 2,688 | 1,401 | 52 % | 5,855 | 3,943 | 1,912 | 48 % |
Total capital expenditures | 15,344 | 12,682 | 2,662 | 21 % | 25,469 | 15,473 | 9,996 | 65 % |
Capital expenditures of
Outlook
2023 started the year with crude oil prices buoyed by higher demand from
CWC's activity level started off strong in 2023 but was temporarily hindered by
While CWC expects a continuation of its strong operational and financial results for the remainder of 2023, various global uncertainties may derail the Company's expected positive path.
About
Forward-Looking Information
This News Release contains certain forward-looking information and statements (collectively, "forward-looking statements") within the meaning of applicable Canadian securities legislation. Certain statements contained in this News Release, including those contained in the section titled "Outlook" and including statements which may contain such words as "anticipate", "could", "continue", "should", "seek", "may", "intend", "likely", "plan", "estimate", "believe", "expect", "will", "objective", "ongoing", "project" and similar expressions are intended to identify forward-looking statements. In particular, this News Release contains forward-looking statements including management's assessment of future plans and operations, planned levels of capital expenditures, expectations as to industry and Company activity levels in various areas, expectations on the sustainability of future cash flow and earnings, expectations with respect to crude oil and natural gas prices, expectations regarding the level and type of drilling and production and related drilling and well services activity in the WCSB and
Readers are cautioned that the foregoing list of assumptions, risks, uncertainties and factors is not exhaustive. See also the section entitled "Risks and Uncertainties" for further risk factors. The forward-looking statements contained in this News Release are made as of the date of this News Release and, except to the extent expressly required by applicable securities laws and regulations, CWC assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this News Release and all subsequent forward-looking statements, whether written or oral, attributable to CWC or persons acting on CWC's behalf are expressly qualified in their entirety by these cautionary statements. Any forward-looking statements made previously may be inaccurate now.
Non-GAAP and Other Financial Measures
Three months ended | Six months ended | |||
$ thousands, except shares, per share amounts and margins | ||||
2023 | 2022 | 2023 | 2022 | |
NON-GAAP MEASURES | ||||
Adjusted EBITDA: | ||||
Net income (loss) | (1,625) | 2,664 | 3,044 | 6,103 |
Add: | ||||
Stock based compensation | 300 | 231 | 600 | 462 |
Finance costs | 529 | 605 | 1,486 | 993 |
Depreciation | 3,371 | 2,982 | 6,977 | 5,908 |
(Gain) loss on disposal of equipment | (576) | 227 | (694) | 564 |
Income tax expense (recovery) | (421) | 891 | 1,079 | 1,996 |
Adjusted EBITDA(1) | 1,578 | 7,600 | 12,492 | 16,026 |
Adjusted EBITDA per share – basic and diluted(1) | $ 0.00 | $ 0.01 | $ 0.02 | $ 0.03 |
Adjusted EBITDA margin (Adjusted EBITDA/Revenue)(1) | 5 % | 18 % | 14 % | 19 % |
Weighted average number of shares outstanding - basic | 518,754,823 | 509,786,609 | 518,539,926 | 509,459,831 |
Weighted average number of shares outstanding - diluted | 518,754,823 | 523,123,662 | 534,949,670 | 520,768,461 |
Gross margin: | ||||
Revenue | 34,474 | 42,681 | 92,012 | 83,512 |
Less: Direct operating expenses | 26,851 | 30,262 | 66,673 | 57,575 |
Gross margin(2) | 7,623 | 12,419 | 25,339 | 25,937 |
Gross margin percentage(2) | 22 % | 29 % | 28 % | 31 % |
$ thousands | ||
Working capital (excluding debt): | ||
Current assets | 33,101 | 49,925 |
Less: Current liabilities | (13,084) | (14,848) |
Add: Current portion of long-term debt | 1,021 | 865 |
Working capital (excluding debt) (3) | 21,038 | 35,942 |
Working capital (excluding debt) ratio(3) | 2.7:1 | 3.6:1 |
Net debt: | ||
Long-term debt | 40,043 | 42,139 |
Less: Current assets | (33,101) | (49,925) |
Add: Current liabilities | 13,084 | 14,848 |
Net debt (4) | 20,026 | 7,062 |
(1) | Adjusted EBITDA (earnings before interest and finance costs, income tax expense (recovery), depreciation, gain or loss on disposal of assets, stock based compensation and other one-time non-cash gains and losses) is not a recognized measure under IFRS. Management believes that in addition to net income, Adjusted EBITDA is a useful supplemental measure as it provides an indication of the Company's ability to generate cash flow to fund working capital, service debt, pay current income taxes, repurchase common shares under the Normal Course Issuer Bid, and fund capital programs. Investors should be cautioned, however, that Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of the Company's performance. CWC's method of calculating Adjusted EBITDA may differ from other entities and accordingly, Adjusted EBITDA may not be comparable to measures used by other entities. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by revenue and provides a measure of the percentage of Adjusted EBITDA per dollar of revenue. Adjusted EBITDA per share is calculated by dividing Adjusted EBITDA by the weighted average number of shares outstanding as used for the calculation of earnings per share. |
(2) | Gross margin is calculated from the statement of comprehensive income (loss) as revenue less direct operating costs and is used to assist management and investors in assessing the Company's financial results from operations excluding fixed overhead costs. The gross margin percentage is calculated as gross margin divided by revenue. The Company believes the relationship between revenue and costs expressed by the gross margin percentage is a useful measure when compared over different financial periods as it demonstrates the trending relationship between revenue, costs, and margins. Gross margin and gross margin percentage are non-GAAP measures and do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures provided by other companies. |
(3) | Working capital (excluding debt) is calculated based on current assets less current liabilities excluding the current portion of long-term debt. Working capital (excluding debt) is used to assist management and investors in assessing the Company's liquidity. Working capital (excluding debt) does not have any meaning prescribed under IFRS and may not be comparable to similar measures provided by other companies. The working capital (excluding debt) ratio is calculated as current assets divided by the difference of current liabilities less the current portion of long-term debt. |
(4) | Net debt is calculated based on long-term debt less current assets plus current liabilities. Net debt is not a recognized measure under IFRS and does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures provided by other companies. Management believes net debt is a useful indicator of a company's debt position. |
SOURCE
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