CALGARY, ALBERTA — (Marketwired) — 08/02/13 — Xtreme Drilling and Coil Services (“Xtreme” or the “Company”) (TSX: XDC) announces summary results for the three and six months ended June 30, 2013. It is anticipated that filing will take place on SEDAR of the Condensed Interim Consolidated Financial Statements and Management–s Discussion and Analysis on Friday, August 2, 2013.
Highlights – Q2 2013
Election of a New Board Member
Shareholders approved the appointment of Mr. James Renfroe Jr. as the seventh member of the Board of Directors at the Special Meeting of Shareholders held on August 2, 2013. Of the 33,399,711 votes represented at the Special Meeting, Mr. Renfroe received 32,875,745 votes for (98.43%) and 523,966 votes withheld (1.57%). Mr. Renfroe is an independent businessman, and currently a non-executive Director of Expro Group, an international oilfield service company. Mr. Renfroe was previously the Senior Strategic Advisor to the CEO of GE Oil and Gas. Prior to that Mr. Renfroe was Executive Director and CEO of the Well Support Division of Wood Group, PLC, a multinational oil and gas services company. Mr. Renfroe has an extensive background in executive leadership, strategic planning, operations and business development having worked for Halliburton Company in various executive positions from 1974 to 2007. While working for Halliburton, Mr. Renfroe managed multiple product lines (globally) and participated in a number of structural changes and process improvements to enhance organizational effectiveness. He led acquisitions and divestitures, as well as strategy development.
Excerpt from Management–s Discussion and Analysis
For the three and six months ended June 30, 2013
Outlook
During the second quarter of 2013 the Company continued to focus on improving financial and operating performance. Utilization in the US XDR drilling fleet remained strong at 92%. It is anticipated that the only idle US rig will begin work by the end of August. This should increase the utilization for the US drilling fleet in the third quarter. Along with this we anticipate slightly higher repair and maintenance expenses in the third quarter related to preparing the rig for work. The core US drilling markets of the Bakken and greater DJ Basin remain active as rig counts have increased by 12% and 27% respectively in 2013. We have a number of contracts coming up for renewal in late 2013 and early 2014 but due to the fact that our entire US drilling fleet is operating in these two active markets we are confident in our ability to roll or reposition our expiring contracts. Currently, two of the three XDR rigs that were up for renewal in the third quarter have been extended into early 2014. As new budgets are approved at year end we are optimistic that these rigs will be re-contracted beyond their current term.
In Canada the three XDR rigs that operated in the second quarter had a 41% utilization rate which was significantly higher than the CAODC industry average of 18%. The Canadian market continues to face head winds and as such we anticipate that utilization in our Canadian XDR division will be in the 70-75% range over the second half of the year. Margins remain under pressure based on lower day rates. During the second quarter revenue per operating day was down by 30%. We anticipate it will bounce back in the second half of the year but below 2012 levels.
The US XSR business had an increase in utilization and operating margin during the second quarter. The division set new records for reach with 2 5/8 inch coiled tubing in the Eagle Ford by completing wells with horizontals in excess of 10,400 feet with total measured depth of 20,400 feet. We have now demonstrated that with Xtreme technology customers can make it to the toe of the longest reach laterals that are being drilled in the Eagle Ford. Due to this we have begun to clearly differentiate our service offerings from commoditized 2 inch coiled tubing competitors. We are excited about the market and potential to put our fourth unit to work in later in 2013.
The Saudi XSR business maintained strong utilization and margins during the second quarter. The current contract, which was a two year contracts with a 1 year renewal, finished up after quarter end with impressive operational performance for the customer. With that, the units were extended for two months while the longer term extensions are finalized. A new rate structure became effective with the recent renewals and is expected to increase operating margins. Management is currently pursuing new opportunities in the region.
In the second half of 2013 management will continue to focus on de-leveraging the balance sheet and maximizing operating performance and cash flow. This should provide Xtreme the flexibility to pursue opportunities in the ultra-deep long reach re-entry and completion market with our leading edge patented coil tubing technology in 2014.
Conference Call Details
Xtreme has scheduled a conference call on Tuesday, August 6, 2013, beginning promptly at 10:00 am MDT (11:00 am CDT; 12:00 am EDT) to discuss the 2013 second 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.
+1 800-766-6630 (North America Toll-Free) or +1 416-695-6622 (Alternate)
An audio replay of the call will be available until Tuesday, August 13, 2013. To access the replay, call +1 800-408-3053 or +1 905-694-9451 and enter pass code 4828220.
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 August 2, 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.
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