CALGARY, ALBERTA — (Marketwired) — 05/07/13 — Xtreme Drilling and Coil Services (TSX: XDC) (“Xtreme” or the “Company”) announces summary results for the three months ended March 31, 2013. It is anticipated that filing will take place on SEDAR of the interim Condensed Consolidated Financial Statements and Management–s Discussion and Analysis by Friday, May 10, 2013.
Xtreme has scheduled a conference call on Wednesday, May 8, 2013, beginning promptly at 9:00 am MDT (10:00 am CDT; 11:00 am EDT) to discuss the 2013 first quarter financial and operating results. Tom Wood, Chief Executive Officer, will host the conference call with participation from Matt Porter, Chief Financial Officer.
Conference operator dial-in numbers
To participate in the conference call, please dial in as follows approximately ten minutes before the start time in your time zone.
+1 800-769-8320 (North America Toll-Free) or +1 416-695-6616 (Alternate)
An audio replay of the call will be available until Friday, May 17, 2013. To access the replay, call +1 905-694-9451 or +1 800-408-3053 and enter pass code 8732293.
Highlights – Q1 2013
Excerpt from Management–s Discussion and Analysis
For the three months ended March 31, 2013
Outlook
The focus on execution and optimization continued at Xtreme during the first quarter of 2013. The Company improved financial performance to maintain the momentum of the previous three quarters. Both revenue and adjusted EBITDA reached all-time quarterly highs. Management is confident that the foundation has been laid over the past nine months that will allow the Company to produce consistent financial and operating results well into the future.
While the US rig count has recently moderated or even slightly decreased, Xtreme has not felt the effects. At quarter end the Company had six rigs operating in the Williston Basin, ten rigs operating in the greater DJ Basin, and one rig operating in Utah. The two primary US plays of the Bakken and the Niobrara have remained strong. The successful drilling programs of several operators in the Wattenberg/Niobrara field of Colorado have led to increased demand for drilling. This has shown up in the rig count, which has increased from 30 operating rigs at the end of the first quarter 2012 to 51 operating rigs at the end of the first quarter 2013. Xtreme has participated in this growth as four additional XDR 500 rigs were contracted in the Niobrara over the past year. These new contracts increased Xtreme–s market share to 20% in this growing play.
In South Texas, Xtreme operates two XSR coiled tubing units in the Eagle Ford play. Drilling activity has remained robust with approximately 200 drilling rigs operating. Although the Company does not drill in the Eagle Ford the rig count is typically a good proxy for completion demand. Since the XSR division was reorganized in the third quarter of 2012, Xtreme has been able to consistently improve operating performance. Utilization levels and operating margins have increased in each of the past three quarters. This business continues to deliver excellent operational results for customers and has built a reputation as the long reach coil provider of choice in the Eagle Ford.
Drilling Segment – XDR
Xtreme ended the quarter with 21 XDR rigs available to work. Of these rigs 17 of 18 were under long term contracts in the United States and 1 of 3 rigs was working well-to-well in Canada. At quarter end the Company had approximately 4,650 days on term contract for the remainder of 2013 and an additional 3,900 days contracted beyond 2013. The average remaining duration on the contracted rig fleet was approximately 1.25 years at quarter end. Two XDR 500 rigs and one XDR 400 rig are up for renewal in the second half of the year in the Bakken. Discussions with existing customers are currently taking place and it is anticipated at this time that each of these rigs will remain in the Williston Basin.
Drilling services continued to be the largest revenue segment in the Company. Canadian and US drilling operations represented 82%, or $43.3 million, of revenue for the first quarter. Margin improvement continued as operating margin increased to 41.7% of revenue or $18.1 million. This was driven by new processes that were implemented over the previous nine months with the objective of improving the overall cost structure of the drilling division.
Canada continues to be slow evidenced by the fact that horizontal well permits were down 10% year-over-year, as was the rig count. In the quarter, the Company had 179 operating days in Canada compared to 174 in the fourth quarter of 2012. The Company had one rig work into break up. It is anticipated that the three XDR rigs located in Canada will begin work when road bans come off in June.
Coil Service Segment – XSR
The US XSR division began to hit its stride during the latter half of the first quarter. March was a record month both on revenue and operating margin. The current work backlog has given management the confidence to begin the process of deploying the third unit to the Eagle Ford. It is anticipated that the unit will be operating by mid-June.
For the first quarter, operating days were 86 which was up from 84 in the previous period. During the quarter the XSR division completed 39 jobs and since inception has performed 164 jobs. Over the course of these wells Xtreme has never left any coiled tubing in the well. This is an unprecedented operational record. In addition, the Company has now completed wells to 20,344 feet of total measured depth and 10,240 feet of total lateral length with 2 5/8 inch coiled tubing.
In Saudi Arabia the strong performance continued in the first quarter. Operating margins improved on very strong utilization of 99%. The Company is still waiting to hear the final results on the extension of the two units in Saudi. They will complete the existing contract in July and August respectively. The new contract has been bid and it is expected that an announcement is imminent.
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, utilization of drilling rigs in the Company–s current and future fleet, and any potential outcome relating to claims and litigation. Further, the FLS herein may relate to trade credit insurance carried by the Company to mitigate receivables collection risk. Although Xtreme believes expectations reflected in these FLS are reasonable, readers should not place undue reliance on them because Xtreme 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.
These statements are based on certain factors and assumptions including, but not limited to: the assessment of current and projected future operations; ongoing and future strategic business alliances, negotiations and opportunities to enter new, extend or complete existing contracts; the availability and cost of financing; foreign 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 rates; and government regulations. Although Xtreme considers the assumptions used to prepare this news release reasonable, based on information available to management as of May 7, 2013, ultimately the assumptions may prove to be incorrect.
Forward-looking statements 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 market demand, foreign currency exchange rates, and commodity prices; access to credit and to equity markets; the availability of qualified personnel; vendor-provided rig components; and, competition for customers.
Management–s assumptions considered the following: compliance with the terms of the Company–s current and proposed new credit facility; ongoing access to key supplies and components required to continue operating and maintaining equipment, including fuel; continued successful performance of drilling 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 opportunities; willingness and ability of customers to remit amounts owing to Xtreme 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, supply and demand; fluctuation in foreign currency exchange and interest rates; financial stability of Xtreme–s customers; current and future applications for Xtreme–s proprietary technology; competition from other drilling contractors; regulatory and economic conditions in regions where Xtreme operates; environmental constraints; changes to government legislation; international trade barriers or restrictions; and, where appropriate, global political and military events.
Financial outlook information 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 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 Drilling and Coil Services
Xtreme Drilling and Coil Services Corp. (“XDC” on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification drilling rigs and coiled tubing well service units featuring leading-edge proprietary technology including AC high capacity coil injectors, deep re-entry drilling capability, modular transportation systems and continuous integration of in-house advances in methodologies.
Currently Xtreme operates two service lines: Drilling Services and Coil Services under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada, the United States and Saudi Arabia. For more information about the Company, please visit .
Contacts:
Xtreme Drilling and Coil Services Corp.
Matt Porter
Chief Financial Officer
+1 281 994 4604
Xtreme Drilling and Coil Services Corp.
16285 Park Ten Place, Suite 650
Houston, TX 77084