CALGARY, ALBERTA--(Marketwire - Aug. 11, 2011) - Xtreme Coil Drilling Corp. (TSX:XDC) ("Xtreme Coil", the "Company") announces filing on SEDAR of the interim unaudited Consolidated Financial Statements and Management's Discussion and Analysis for the three and six months ended June 30, 2011. Effective January 1, 2011, Xtreme Coil began reporting in accordance with International Financial Reporting Standards ("IFRS"). Prior year comparative amounts have been changed to reflect results as if the Company had always prepared its financial results using IFRS. All interim and annual reports may be viewed the Company's website www.xtremecoildrilling.com and at www.sedar.com.
Xtreme Coil has scheduled a conference call on Friday, August 12, 2011 beginning promptly at 10:00am MT (11:00am CT; 12:00am ET) to discuss Xtreme Coil's 2011 six months financial and operating results. Rod Uchytil, President and Chief Executive Officer, will host the conference call with participation from Tom Wood, Executive Chairman and other members of management.
To participate in the conference call, please dial in approximately ten minutes before the start time in your time zone +1 877-240-9772 (North America Toll-Free) or +1 416-340-8530 (Alternate). An audio replay of the call will be available until Friday, August 26, 2011. To access the replay, call +1 905-694-9451 or +1 800-408-3053 and enter pass code 6141700, followed by the pound (#) sign.
Highlights - 2011 Second Quarter
(with changes compared to 2010 Second Quarter)
-- revenue of $24.3 million, an increase of 61 percent
-- EBITDA of $5.6 million, an increase of 103 percent
-- gross margin of $8.3 million, an increase of 44 percent
-- net income per common share - basic $0.02
-- operating days of 1,165, an increase of 215 percent
-- rig utilization 80 percent, an increase of 220 percent
-- closed new $90 million credit facility
-- completed $57.9 million bought deal equity offering
-- increased 2011 capital program to $115 million from phase one $59
million
In 2011 Third Quarter
-- contracted four XDR 500 new-build rigs for 2012 delivery at one per
quarter
-- early-released XDR 500 in Texas subsequently contracted to North Dakota
on a two-year term
-- new XDR 500 commenced operations in North Dakota's Bakken resource play
-- completed XSR 200 rig conversion and mobilizing to North Dakota
Rig #18, an XDR 500, was constructed and pre-commissioned in Alberta. In July 2011, the drilling rig was mobilized to North Dakota's Bakken resource play for final commissioning and commenced operations in early August.
Excerpt from Management's Discussion and Analysis
for the three and six months ended June 30, 2011
Outlook
During the second quarter of 2011, Xtreme Coil completed a new, larger capacity credit facility and an equity financing, both of which will fund future growth. The credit agreement, finalized on May 6, 2011, with a syndicate of financial institutions, provides $90 million consisting of $15 million as a revolving operating loan facility to support financing of general corporate and working capital requirements and $75 million as an extendible loan facility to refinance existing bank indebtedness and to provide working capital for capital expenditures and potential acquisitions.
Also in May, Xtreme Coil undertook a bought deal equity offering which provided financing of approximately $57.9 million before fees at a price of $4.75 per common share. Under the terms of the bought deal, the participating underwriters exercised an overallotment option to place an additional 15 percent of the issued common shares, resulting in total issuance of 12,190,000 common shares to complete the financing.
Following the completion of new financing, the Company announced an expanded capital expenditure program of $115 million. The main components of this strategic growth plan are:
-- One new-build XDR 500 drilling rig completed in July 2011 and commenced
operations in early August 2011.
-- One new-build XDR 500 drilling rig expected to be completed by October
2011.
-- Conversion of an XDR 200 drilling rig for coiled tubing service work
which was completed in July 2011. The conversion project had incurred
unexpected delays. However, the newly commissioned XSR 200 rig is now
mobilizing to North Dakota.
-- Purchase of five existing coiled tubing service rigs and upgrading of
these rigs to include Xtreme Coil's proprietary technology. Completion
of these rigs is anticipated throughout the fourth quarter of 2011.
There is some risk of delay for the anticipated deliveries primarily due
to Xtreme Coil's reliance on third-party manufacturers.
-- Three new-build XSR 200 coiled tubing service rigs now in design with
completion anticipated during the third quarter of 2012 subject to
availability of components and industry demand being experienced by
third-party manufacturers.
-- One new-build XDR 500 drilling rig was previously under construction in
the phase one 2011 capital expenditure program. This rig has
subsequently been contracted as part of a 2012 commitment for four new-
build rigs.
-- The purchase of long-lead time items equivalent to approximately 30 - 40
percent of the value of one XDR 500 drilling rig. This will provide a
timing advantage for additional discussions related to commitments for
further new-build drilling rigs.
-- Maintenance capital for existing operations.
During the second quarter of 2011, the XDR 200 drilling rig, which had been contracted and operating in Mississippi since the first 2011, completed its project. The rig was demobilized and stacked in Mission, Texas. As of June 30, 2011, four XDR drilling rigs were not contracted. Three of these rigs are XDR 200 drilling rigs and the fourth rig was an XDR 200 drilling rig being converted to a XSR 200 rig for coiled tubing well servicing operations and is now in transit to North Dakota. The Company continues to pursue opportunities for our XDR 200 drilling rigs. However the current market for these somewhat lower capacity drilling rigs is not as robust as the market for Xtreme Coil's large capacity drilling rigs.
The conversion of the XDR 200 drilling rig to a XSR 200 coiled tubing service rig was not completed in the second quarter as anticipated. It required additional modifications during the final commissioning stage and waited for some equipment not available in the planned time frame. Xtreme Coil is now mobilizing the rig to North Dakota where it will perform clean-outs of fracture plugs. When it arrives, a customer has committed to a field trial for this leading-edge concept service rig. Additional customers have expressed interest in using the rig following the proof-of-concept field trial.
Modifications of the five coiled tubing service rigs have continued as planned since they were added to the fleet. At the close of the second quarter, these rig upgrades remain on schedule. However, as noted earlier, there is some risk of delay. Xtreme Coil has hired some supervisory personnel and is experiencing a good flow of applicants for new positions required to operate the service rigs in North Dakota.
The Company's operations in Saudi Arabia continued during the second quarter of 2011 and continue to achieve low rig-related non-productive time and consistently superior operational results. Revenue was modestly constrained by certifications, repairs and moving times associated with other third-party contractors who participate in the overall bundled services contract. One of the underbalanced drilling equipment providers was changed during the second quarter which also resulted in some lost days for Xtreme Coil as the new sub-contractor arrived and started operations. However, the Company is expecting faster move times by the new contractor. At the close of the second quarter of 2011, there were two different sub-contractors providing underbalanced drilling equipment, the service which has had the most impact for all other parties working within the bundled services contract.
Field testing of the prototype mining rig recommenced during the second quarter of 2011 and modifications were made to certain components followed by some waiting time for required downhole tools to progress testing. The joint venture partners have not yet made a commercial determination for the rig and field testing will continue. Xtreme Coil remains encouraged with results to date and continues to be committed to this innovative prototype rig.
Subsequent to the close of the second quarter, Xtreme Coil and a customer agreed to early-release an XDR 500 rig working in the Eagle Ford. The Company subsequently entered a two-year contract for the rig with an independent operator in the Bakken in North Dakota. The relocation of this rig will expand the critical mass of operations and create regional cost efficiencies and is anticipated to commence operations in North Dakota by mid-September. Thus, Xtreme Coil expects to have three XDR 500 drilling rigs operating in the Bakken by the fourth quarter of 2011 as well as additional XSR 200 rigs expected to operate in the same resource play by the fourth quarter.
In July 2011, Xtreme Coil announced a new contract to provide four new-build XDR 500 drilling rigs in 2012. The rigs deliveries are expected to occur at a rate of one per quarter during 2012. As noted, the XDR 500 drilling rig initially being built on speculation is now dedicated for inclusion with the rigs planned for this significant contract. The remaining three drilling rigs for this contract will be included in 2012 capital expenditures.
There is continuing enthusiasm for Xtreme Coil's equipment and proprietary technology in the Saudi Arabia and other Middle East markets suggesting opportunities for future growth. However, the business development cycle in this region can be longer than in North America and management expects additional effort will be required throughout 2012 to expand operations beyond the current two rigs operating in the region.
During the last half of 2011, Xtreme Coil anticipates achieving these key milestones:
-- commencement of operations for two new-build XDR 500 drilling rigs;
-- continuing to win additional new-build rig contracts;
-- proof-of-concept for the 2-5/8" ultra-deep coiled tubing service rigs in
the Bakken with our XDR 200 to XSR 200 conversion rig;
-- completion of modifications to five coiled tubing service rigs and the
initiation of coiled tubing services business line; and
-- completion of field testing of our joint venture mining rig and a
determination regarding its commerciality.
Successful completion of these priorities is expected to deliver steady growth of Xtreme Coil's fleet of drilling and service rigs throughout 2011 and into 2012. A range of current and new opportunities exist to apply the Company's proprietary technology to complex resource plays in North America.
Additional Information
Information relating to Xtreme Coil is available on SEDAR at www.sedar.com. To obtain copies of published corporate information, contact the Corporate Secretary at Xtreme Coil Drilling Corp., 1402, 500 Fourth Avenue SW, Calgary, AB T2P 2V6 (telephone +1 403 262-9500), visit Xtreme Coil's website www.xtremecoildrilling.com or e-mail ir@xtremecoil.com.
Xtreme Coil Drilling Corp.
Consolidated Statements of Financial Position
(unaudited)
June 30, December
(in thousands of Canadian dollars) 2011 31, 2010
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Assets
Current assets
Cash and cash equivalents $ 11,127 $ 2,994
Accounts receivable, net of allowance for doubtful
accounts of $21 and $322, respectively 36,919 37,083
Other receivables 2,031 2,200
Prepaid expenses and other 1,118 2,551
Income taxes recoverable 1,798 1,967
Inventory 5,821 5,402
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Total Current Assets 58,814 52,197
Deferred tax asset 4,603 4,265
Property and equipment, net 254,584 233,193
Intangible assets 4,675 4,793
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Total Assets $ 322,676 $ 294,448
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Liabilities and Shareholders' Equity
Current liabilities
Bank indebtedness $ - $ 8,317
Accounts payable and accrued liabilities 9,915 10,097
Current portion of long-term debt 500 12,224
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Total current liabilities 10,415 30,638
Long-term debt 14,712 18,952
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Total Liabilities 25,184 49,590
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Shareholders' equity
Share capital 310,414 253,765
Contributed surplus 9,525 8,585
Accumulated deficit (2,573) (4,496)
Accumulated other comprehensive loss (19,817) (12,996)
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Total Shareholders' Equity 297,549 244,858
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Total Liabilities and Shareholders' Equity $ 322,676 $ 294,448
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Xtreme Coil Drilling Corp.
Consolidated Statements of Income
(unaudited)
(in thousands of
Canadian dollars,
except share and per
share data) Three months ended Six months ended
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June 30, June 30, June 30, June 30,
2011 2010 2011 2010
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Revenue $ 24,267 $ 15,111 $ 47,438 $ 40,711
Expenses
Operating expenses 15,978 9,372 32,503 23,829
General and
administrative
expenses 2,664 2,964 5,170 6,662
Depreciation of
property and
equipment 2,855 2,087 5,427 4,942
Amortization of
intangibles 76 73 152 146
Stock-based
compensation 618 132 1,082 554
Foreign exchange
(gain) loss (161) 67 (288) (270)
Gain (loss) on sale
of equipment (42) 19 (49) 37
Interest expense 591 457 1,009 938
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Income (loss) before
tax for the period 1,688 (60) 2,432 3,873
Tax expense
(recovery)
Current 84 (444) 169 1,562
Deferred 271 331 340 (1,147)
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Total tax expense
(recovery) 355 (113) 509 415
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Net income for the
period $ 1,333 $ 53 $ 1,923 $ 3,458
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Net income per common
share
- basic $ 0.02 $ - $ 0.03 $ 0.07
- diluted $ 0.02 $ - $ 0.03 $ 0.06
Weighted average
number of common
shares
- basic 57,253,022 53,183,035 55,273,993 53,114,623
- diluted 58,012,491 53,657,584 56,059,910 53,831,352
Xtreme Coil Drilling Corp.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
Three months ended Six months ended
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----------------------------------------
June 30, June 30, June 30, June 30,
(in thousands of Canadian dollars) 2011 2010 2011 2010
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Net income for the period $ 1,333 $ 53 $ 1,923 $ 3,458
Other comprehensive income (loss)
Unrealized gain (loss) on
translating financial statements
of foreign operations (1,183) 8,167 (6,821) 2,183
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Comprehensive income (loss) for the
period $ 150 $ 8,220 $ (4,898) $ 5,641
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Consolidated Statements of Changes in Equity
(unaudited)
Share Contributed
(in thousands of Canadian dollars) capital Warrants Surplus
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Balance at
January 1, 2010 $ 252,714 1,630 5,509
Currency translation
differences - - -
Cancellation of warrants (1,630) 1,630
Net income for the
period - - -
Employee share
option scheme:
Value of employees
services 103 - 657
Proceeds from shares
issued 926 - (103)
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Balance at
June 30, 2010 $ 253,743 - 7,693
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Balance at
January 1, 2011 $ 253,765 - 8,585
Currency translation
differences - - -
Net income for the
period - - -
Employee share
option scheme:
Value of employee
services 158 - 1,082
Proceeds from shares
Issued, net of share
issue costs 56,491 - (142)
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Balance at
June 30, 2011 $ 310,414 - 9,525
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Consolidated Statements of Changes in Equity
(unaudited)
Accumulated
other
Accumulated comprehensive Total
(in thousands of Canadian dollars) deficit gain (loss) equity
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Balance at
January 1, 2010 (8,924) - $ 250,929
Currency translation
differences - 2,183 2,183
Cancellation of warrants - -
Net income for the
period 3,458 - 3,458
Employee share
option scheme:
Value of employees
services - - 760
Proceeds from shares
issued - - 823
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Balance at
June 30, 2010 (5,466) 2,183 $ 258,153
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Balance at
January 1, 2011 (4,496) (12,996)$ 244,858
Currency translation
differences - (6,821) (6,821)
Net income for the
period 1,923 - 1,923
Employee share
option scheme:
Value of employee
services - - 1,240
Proceeds from shares
Issued, net of share
issue costs - - 56,349
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Balance at
June 30, 2011 (2,573) (19,817)$ 297,549
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Xtreme Coil Drilling Corp.
Consolidated Statement of Cash Flows
For the six months ended June 30, 2011 and 2010
(unaudited)
June 30, June 30,
(in thousands of Canadian dollars) 2011 2010
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Cash flow provided by (used in):
Operating activities
Net income for the period $ 1,923 $ 3,458
Items not affecting cash:
Depreciation and amortization 5,579 5,089
Stock-based compensation 1,082 554
Gain (loss) on sale of equipment (49) 37
Provision for doubtful accounts (292) 359
Write-off of coiled tubing - 415
Interest expense 1,009 938
Unrealized foreign exchange gain (23) (168)
Deferred tax recovery 340 (1,147)
Interest paid (867) (968)
Changes in items of working-capital 1,193 5,798
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9,895 14,365
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Financing activities
Proceeds from shares issued 55,261 -
Proceeds from exercise of stock options 579 926
Proceeds from long-term debt 80,162 -
Repayment of long-term debt (96,126) (5,876)
Repayment of operating facility (8,317) -
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31,559 (4,950)
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Investing activities
Proceeds from sale of equipment 190 665
Capital expenditures (32,950) (16,228)
Increase in intangibles (34) (99)
Other - 36
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(32,794) (15,626)
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Impact of foreign exchange on cash and
cash equivalents (527) 460
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Increase (decrease) in cash and cash
equivalents 8,133 (5,751)
Cash and cash equivalents,
beginning of period 2,994 21,864
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Cash and cash equivalents,
end of period $ 11,127 $ 16,113
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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 and utilization of drilling and service rigs in the Company's current and future fleet. Although Xtreme Coil believes expectations reflected in these FLS are reasonable, readers should not place undue reliance on them because Xtreme Coil 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.
FLS are based on certain factors and assumptions including, but not limited to: the assessment of current and projected future drilling, well servicing and related operations; ongoing and future strategic business alliances, negotiations and opportunities to enter new, extend or complete existing contracts; the availability and cost of financing; 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 structures and rates; and government regulations. Although Xtreme Coil considers the assumptions used to prepare this news release reasonable, based on information available to management as of August 10, 2011, ultimately the assumptions may prove to be incorrect.
FLS 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 and well servicing market demand, currency exchange rates, and commodity prices; access to credit and to equity markets; the availability and retention of qualified personnel; vendor-provided rig components and services; and, competition for customers.
Management's assumptions considered the following: compliance with the terms of the Company's current credit facility; ongoing access to key services, supplies and components required to continue operating and maintaining equipment, including fuel; continued successful performance of drilling, well servicing 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 and well servicing opportunities; willingness and ability of customers to remit amounts owing to Xtreme Coil 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 as well as supply and demand; fluctuation in currency exchange and interest rates; financial stability of Xtreme Coil's customers; current and future applications for Xtreme Coil's proprietary technology; related services provided by, and competition from, other drilling and well servicing contractors; regulatory and economic conditions in regions where Xtreme Coil operates; environmental constraints; changes to government legislation; international trade barriers or restrictions; and, where appropriate, global economic, political and military events.
FLS 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 Coil 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 Coil
Xtreme Coil owns and operates a fleet of proprietary, dual-purpose deep capacity drilling rigs featuring the Company's patented Coil Over Top Drive(r) designs and is expanding the fleet to include extended-reach coiled tubing service rigs. These rigs offer oil and natural gas companies outstanding performance and efficiency through leading-edge technology for conventional and coil drilling and deep coil well services. We have drilling rigs under contract in Colorado, North Dakota, Texas and Wyoming. Two deep coil service rigs are conducting re-entry horizontal drilling operations in Saudi Arabia. Xtreme Coil has five coiled tubing service rigs undergoing technical upgrades before they will be ready to deploy later in 2011. A sixth deep coil service rig is in transit to North Dakota's Bakken resource play to conduct a field trial. Xtreme Coil's common shares trade on the Toronto Stock Exchange under the symbol "XDC."
Contact Information:
Rod Uchytil
President and Chief Executive Officer
+1 403 262 9500
+1 403 262 9522 (FAX)
Xtreme Coil Drilling Corp.
1402, 500 Fourth Avenue SW
Calgary, Alberta T2P 2V6
ir@xtremecoil.com
www.xtremecoildrilling.com