First Quarter 2024 Operating Results:
- First quarter revenue decreased by
$17.2 million (or 22%), to$62.0 million in 2024, as compared to$79.2 million in the first quarter of 2023. Contract drilling revenue totalled$39.6 million in the first quarter of 2024, which was$18.5 million (or 32%), lower than$58.1 million in the first quarter of 2023. Production services revenue was$22.4 million for the three months endedMarch 31, 2024 , an increase of$1.1 million (or 5%) as compared to$21.3 million in the same period of the prior year. In the first quarter of 2024, revenue was negatively impacted by lower activity in contract drilling inCanada and the US due to lower commodity prices in the first part of 2024, specifically natural gas prices, compared to the first quarter of 2023 as described below:- In
Canada , Operating Days of 952 days in the first quarter of 2024 were 331 days (or 26%) lower compared to 1,283 days in the first quarter of 2023. Drilling rig utilization inCanada was 31% in the first quarter of 2024, compared to 42% in the same period of the prior year mainly due to customers cancelling or deferring their programs into the second half of 2024, as a result of lower natural gas prices in 2023 that continued into 2024.The Canadian Association of Energy Contractors ("CAOEC") industry Operating Days decreased 1% in the first quarter of 2024, compared to the first quarter of 2023, while the CAOEC industry average utilization increased five percentage points to 50%1 for the first quarter of 2024, compared to the CAOEC industry average utilization of 45% in the first quarter of 2023. The increase in the CAOEC industry average utilization is attributable to a 13% decrease in the average number of drilling rigs registered with the CAOEC in the first quarter of 2024 compared to the first quarter of 2023. If the number of registered drilling rigs with the CAOEC had not decreased, the CAOEC industry average utilization in the first quarter of 2024 would have been 45%, consistent with the first quarter of 2023. Revenue per Operating Day averaged$34,233 in the first quarter of 2024, an increase of 3% compared to the same period of the prior year, mainly due to higher pricing; - In
the United States ("US"), drilling rig utilization averaged 26% in the first quarter of 2024, compared to 45% in the first quarter of 2023, with Operating Days decreasing from 327 days in the first quarter of 2023 to 164 days in the first quarter of 2024 due to lower industry activity. Average active industry rigs of 6232 in the first quarter of 2024 were 18% lower compared to the first quarter of 2023. Revenue per Operating Day for the first quarter of 2024 averagedUS$31,858 , a 4% decrease compared toUS$33,021 in the same period of the prior year, mainly due to higher standby revenue in 2023; and - In
Canada , service rig utilization of 44% in the first quarter of 2024 was consistent with the same period of the prior year. Revenue per Service Hour averaged$1,058 in the first quarter of 2024 and was 3% higher than the first quarter of 2023, due to improved pricing and inflationary pressures on operating costs, including higher wages that are passed through to the customer, which were partially offset by lower fuel surcharges as more customers provided their own fuel.
- In
- The Company generated net income of
$1.5 million in the first quarter of 2024 ($0.04 net income per basic common share) as compared to net income of$4.4 million in the same period in 2023 ($0.13 net income per basic common share). The change can mainly be attributed to a$0.7 million decrease in income tax expense, a$0.5 million decrease in stock based compensation expense, and a$0.3 million decrease in finance costs, which were partially offset by a$4.0 million decrease in Adjusted EBITDA,$0.2 million increase in depreciation expense due to property and equipment additions and a$0.2 million increase in other items. Administrative expenses in the first quarter of 2024 were$0.6 million higher than the first quarter of 2023, due to higher employee related costs including severance. - Adjusted EBITDA of
$15.2 million in the first quarter of 2024 was$4.0 million (or 21%) lower compared to$19.2 million in the first quarter of 2023. Adjusted EBITDA in 2024 was lower due to lower drilling revenue inCanada and the US, as well as lower pricing in the US, and inflationary pressures on all costs. - First quarter additions to property and equipment of
$1.9 million in 2024 compared to$5.2 million in the first quarter of 2023, consisting of$0.6 million of expansion capital related to rig upgrades and$1.3 million of maintenance capital. - On
March 22, 2024 , the Company extended the maturity of its$35.0 million syndicated revolving credit facility (the "Revolving Facility") and its$10.0 million committed operating facility (the "Operating Facility" and together the "Credit Facilities") fromMay 18, 2025 to the earlier of (i) six months prior to the maturity date of the Second Lien Facility (as defined below) which is currentlyNovember 18, 2025 , or (ii)March 21, 2027 if the Second Lien Facility is extended. The total commitments under the Credit Facilities are unchanged and there were no changes to the Company's financial covenants, where are described on page 8 of the Company's first quarter 2024 MD&A under "Liquidity and Capital Resources".
1 Source: CAOEC, monthly Contractor Summary. |
Selected Financial Information | ||||||||||||||||||
(stated in thousands, except share and per share amounts) | ||||||||||||||||||
Three months ended | ||||||||||||||||||
Financial Highlights | 2024 | 2023 | Change | |||||||||||||||
Revenue | 61,982 | 79,239 | (22 %) | |||||||||||||||
Adjusted EBITDA(1) | 15,219 | 19,196 | (21 %) | |||||||||||||||
Adjusted EBITDA as a percentage of revenue(1) | 25 % | 24 % | 4 % | |||||||||||||||
Cash flow from operating activities | 7,802 | 6,445 | 21 % | |||||||||||||||
Additions to property and equipment | 1,902 | 5,165 | (63 %) | |||||||||||||||
Net income | 1,455 | 4,421 | (67 %) | |||||||||||||||
– basic and diluted net income per share | 0.04 | 0.13 | (69 %) | |||||||||||||||
Weighted average number of shares | ||||||||||||||||||
– basic | 33,843,015 | 33,841,323 | - | |||||||||||||||
– diluted | 33,843,015 | 33,843,048 | - | |||||||||||||||
Outstanding common shares as at period end | 33,843,015 | 33,841,324 | - |
(1) See "Non-IFRS Measures and Ratios" included in this press release. |
Three months ended | ||||||||||||||||||||
Operating Highlights(2) | 2024 | 2023 | Change | |||||||||||||||||
Contract Drilling | ||||||||||||||||||||
Canadian Operations: | ||||||||||||||||||||
Contract drilling rig fleet: | ||||||||||||||||||||
– Average active rig count | 10.5 | 14.3 | (27 %) | |||||||||||||||||
Operating Days | 952 | 1,283 | (26 %) | |||||||||||||||||
Revenue per Operating Day(3) | 34,233 | 33,275 | 3 % | |||||||||||||||||
Drilling rig utilization | 31 % | 42 % | (26 %) | |||||||||||||||||
CAOEC industry average utilization – Operating Days(4) | 50 % | 45 % | 11 % | |||||||||||||||||
Average meters drilled per well | 7,897 | 6,261 | 26 % | |||||||||||||||||
Average Operating Days per well | 13.5 | 13.2 | 2 % | |||||||||||||||||
United States Operations: | ||||||||||||||||||||
Contract drilling rig fleet: | ||||||||||||||||||||
– Average active rig count | 1.8 | 3.6 | (50 %) | |||||||||||||||||
Operating Days | 164 | 327 | (50 %) | |||||||||||||||||
Revenue per Operating Day (US$)(3) | 31,858 | 33,021 | (4 %) | |||||||||||||||||
Drilling rig utilization | 26 % | 45 % | (42 %) | |||||||||||||||||
Average meters drilled per well | 6,048 | 3,516 | 72 % | |||||||||||||||||
Average Operating Days per well | 16.2 | 14.4 | 13 % | |||||||||||||||||
Production Services | ||||||||||||||||||||
Well servicing rig fleet: | ||||||||||||||||||||
– Average active rig count | 28.3 | 28.0 | 1 % | |||||||||||||||||
Service Hours | 18,399 | 18,253 | 1 % | |||||||||||||||||
Revenue per Service Hour(3) | 1,058 | 1,032 | 3 % | |||||||||||||||||
Service rig utilization | 44 % | 44 % | - |
(2) See "Defined Terms" included in this press release. |
(3) See "Non-IFRS Measures and Ratios" included in this press release. |
(4) Source: The CAOEC monthly Contractor Summary. The CAOEC industry average is based on Operating Days divided by total available days. From |
Financial Position at (stated in thousands) | March 31, 2024 | |||
Working capital(1) | 29,423 | 20,125 | 21,923 | |
Total assets | 441,781 | 442,933 | 475,708 | |
Long term debt – non current portion | 111,109 | 111,174 | 126,527 |
(1) See "Non-IFRS Measures and Ratios" included in this press release. |
Business Overview
Western is an energy services company that provides contract drilling services in
Contract Drilling
Western markets a fleet of 41 drilling rigs specifically suited for drilling complex horizontal wells across
Western's marketed and owned contract drilling rig fleets are comprised of the following:
As at | |||||||
2024 | 2023 | ||||||
Rig class(1) | | US | Total | Canada | US | Total | |
Cardium | 11 | - | 11 | 11 | 1 | 12 | |
18 | 1 | 19 | 18 | 1 | 19 | ||
5 | 6 | 11 | 5 | 6 | 11 | ||
Total marketed drilling rigs(2) | 34 | 7 | 41 | 34 | 8 | 42 | |
Total owned drilling rigs | 48 | 7 | 55 | 48 | 8 | 56 |
(1) See "Contract Drilling Rig Classifications" included in this press release. |
(2) Source: CAOEC Contractor Summary as at |
Production Services
Production services provides well servicing and oilfield equipment rentals in
Western's well servicing rig fleet is comprised of the following:
Owned well servicing rigs | As at | |
Mast type | 2024 | 2023 |
Single | 28 | 30 |
Double | 27 | 27 |
Slant | 8 | 8 |
Total owned well servicing rigs | 63 | 65 |
Business Environment
Crude oil and natural gas prices impact the cash flow of Western's customers, which in turn impacts the demand for Western's services. The following table summarizes average crude oil and natural gas prices, as well as average foreign exchange rates, for the three months ended
Three months ended | |||||||||||||||||||||||
2024 | 2023 | Change | |||||||||||||||||||||
Average crude oil and natural gas prices(1)(2) | |||||||||||||||||||||||
Crude Oil | |||||||||||||||||||||||
West Texas Intermediate (US$/bbl) | 76.96 | 76.13 | 1 % | ||||||||||||||||||||
Western Canadian Select (CDN$/bbl) | 77.81 | 74.55 | 4 % | ||||||||||||||||||||
Natural Gas | |||||||||||||||||||||||
30 day Spot AECO (CDN$/mcf) | 2.26 | 3.35 | (33 %) | ||||||||||||||||||||
Average foreign exchange rates(2) | |||||||||||||||||||||||
US dollar to Canadian dollar | 1.35 | 1.35 | - | ||||||||||||||||||||
(1) See "Abbreviations" included in this press release. (2) Source: Sproule |
3 Source: CAOEC Drilling Contractor Summary as at |
West Texas Intermediate on average increased by 1% for the three months ended
Despite similar commodity prices in the first quarter of 2024 in both the US and
Outlook
In 2024, commodity prices are being impacted in the short term by concerns surrounding demand from continued uncertainty concerning the ongoing war in
As previously announced, Western's board of directors has approved a capital budget for 2024 of
As at
Energy service activity in
5 Source: Baker Hughes Company, 2024 Rig Count monthly press releases. |
Non-IFRS Measures and Ratios
Western uses certain financial measures in this press release which do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS"). These measures and ratios, which are derived from information reported in the condensed consolidated financial statements, may not be comparable to similar measures presented by other reporting issuers. These measures and ratios have been described and presented in this press release to provide shareholders and potential investors with additional information regarding the Company. The non-IFRS measures and ratios used in this press release are identified and defined as follows:
Adjusted EBITDA and Adjusted EBITDA as a Percentage of Revenue
Adjusted earnings before interest and finance costs, taxes, depreciation and amortization, other non-cash items and one-time gains and losses ("Adjusted EBITDA") is a useful non-GAAP financial measure as it is used by management and other stakeholders, including current and potential investors, to analyze the Company's principal business activities prior to consideration of how Western's activities are financed and the impact of foreign exchange, income taxes and depreciation. Adjusted EBITDA provides an indication of the results generated by the Company's principal operating segments, which assists management in monitoring current and forecasting future operations, as certain non-core items such as interest and finance costs, taxes, depreciation and amortization, and other non-cash items and one-time gains and losses are removed. The closest IFRS measure would be net income for consolidated results.
Adjusted EBITDA as a percentage of revenue is a non-IFRS financial ratio which is calculated by dividing Adjusted EBITDA by revenue for the relevant period. Adjusted EBITDA as a percentage of revenue is a useful financial measure as it is used by management and other stakeholders, including current and potential investors, to analyze the profitability of the Company's principal operating segments.
The following table provides a reconciliation of net income, as disclosed in the condensed consolidated statements of operations and comprehensive income, to Adjusted EBITDA:
Three months ended | ||||||
(stated in thousands) | 2024 | 2023 | ||||
Net income | 1,455 | 4,421 | ||||
Income tax expense | 528 | 1,167 | ||||
Income before income taxes | 1,983 | 5,588 | ||||
Add (deduct): | ||||||
Depreciation | 10,523 | 10,296 | ||||
Stock based compensation | 437 | 876 | ||||
Finance costs | 2,656 | 3,042 | ||||
Other items | (380) | (606) | ||||
Adjusted EBITDA | 15,219 | 19,196 | ||||
Revenue per Operating Day
This non-IFRS measure is calculated as drilling revenue for both
Revenue per Service Hour
This non-IFRS measure is calculated as well servicing revenue divided by Service Hours. This calculation represents the average hourly rate charged to Western's customers.
Working Capital
This non-IFRS measure is calculated as current assets less current liabilities as disclosed in the Company's consolidated financial statements.
Defined Terms
Average active rig count (contract drilling): Calculated as drilling rig utilization multiplied by the average number of drilling rigs in the Company's fleet for the period.
Average active rig count (production services): Calculated as service rig utilization multiplied by the average number of service rigs in the Company's fleet for the period.
Average meters drilled per well: Defined as total meters drilled divided by the number of wells completed in the period.
Average Operating Days per well: Defined as total Operating Days divided by the number of wells completed in the period.
Drilling rig utilization: Calculated based on Operating Days divided by total available days.
Operating Days: Defined as contract drilling days, calculated on a spud to rig release basis.
Service Hours: Defined as well servicing hours completed.
Service rig utilization: Calculated as total Service Hours divided by 217 hours per month per rig multiplied by the average rig count for the period as defined by the CAOEC industry standard.
Contract Drilling Rig Classifications
Cardium class rig: Defined as any contract drilling rig which has a total hookload less than or equal to 399,999 lbs (or 177,999 daN).
Abbreviations
- Barrel ("bbl");
Canadian Association of Energy Contractors ("CAOEC");- DecaNewton ("daN");
- International Financial Reporting Standards ("IFRS");
- Pounds ("lbs");
- Thousand cubic feet ("mcf"); and
Western Canadian Sedimentary Basin ("WCSB").
Forward-Looking Statements and Information
This press release contains certain forward-looking statements and forward-looking information (collectively, "forward-looking information") within the meaning of applicable Canadian securities laws, as well as other information based on Western's current expectations, estimates, projections and assumptions based on information available as of the date hereof. All information and statements contained herein that are not clearly historical in nature constitute forward-looking information, and words and phrases such as "may", "will", "should", "could", "expect", "intend", "anticipate", "believe", "estimate", "plan", "predict", "potential", "continue", or the negative of these terms or other comparable terminology are generally intended to identify forward-looking information. Such information represents the Company's internal projections, estimates or beliefs concerning, among other things, an outlook on the estimated amounts and timing of additions to property and equipment, anticipated future debt levels and revenues or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. This forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information.
In particular, forward-looking information in this press release includes, but is not limited to, statements relating to: the business of Western; industry, market and economic conditions and any anticipated effects on Western; commodity pricing; the future demand for the Company's services and equipment; the effect of inflation and commodity prices on energy service activity; expectations with respect to customer spending; the completion and success of Western's drilling rig upgrade program; the potential continued impact of the current conflicts in
The material assumptions that could cause results or events to differ from current expectations reflected in the forward-looking information in this press release include, but are not limited to: demand levels and pricing for oilfield services; demand for crude oil and natural gas and the price and volatility of crude oil and natural gas; pressures on commodity pricing; the impact of inflation; the continued business relationships between the Company and its significant customers; crude oil transport, pipeline and LNG export facility approval and development; that all required regulatory and environmental approvals can be obtained on the necessary terms and in a timely manner, as required by the Company; liquidity and the Company's ability to finance its operations; the effectiveness of the Company's cost structure and capital budget; the effects of seasonal and weather conditions on operations and facilities; the competitive environment to which the various business segments are, or may be, exposed in all aspects of their business and the Company's competitive position therein; the ability of the Company's various business segments to access equipment (including spare parts and new technologies); global economic conditions and the accuracy of the Company's market outlook expectations for 2024 and in the future; the impact, direct and indirect, of epidemics, pandemics, other public health crisis and geopolitical events, including the conflicts in
Although Western believes that the expectations and assumptions on which such forward-looking information is based on are reasonable, undue reliance should not be placed on the forward-looking information as Western cannot give any assurance that such will prove to be correct. By its nature, forward-looking information is subject to inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, volatility in market prices for crude oil and natural gas and the effect of this volatility on the demand for oilfield services generally; reduced exploration and development activities by customers and the effect of such reduced activities on Western's services and products; political, industry, market, economic, and environmental conditions in
The forward-looking statements and information contained in this press release are made as of the date hereof and Western does not undertake any obligation to update publicly or revise any forward-looking statements and information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Any forward-looking statements contained herein are expressly qualified by this cautionary statement.
SOURCE
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