Ensign Energy Services Inc. Reports 2022 Third Quarter Results

4 November 2022 at 5:00 am·9-min read

Cision

CALGARY, AB, November 4, 2022 /CNW/ -

THIRD QUARTER HIGHLIGHTS

Revenue for the third quarter of 2022 was $432.6 million, a 61 percent increase from the third quarter of 2021 revenue of $268.6 million.
Revenue by geographic area:
Canadian drilling recorded 4,009 operating days in the third quarter of 2022, a 41 percent increase from 2,846 operating days in the third quarter of 2021. Canadian well servicing recorded 12,857 operating hours in the third quarter of 2022, a 38 percent increase from 9,316 operating hours in the third quarter of 2021.
United States drilling recorded 4,937 operating days in the third quarter of 2022, a 61 percent increase from 3,074 operating days in the third quarter of 2021. United States well servicing recorded 32,877 operating hours in the third quarter of 2022, a one percent increase from 32,452 operating hours in the third quarter of 2021.
International drilling recorded 996 operating days in the third quarter of 2022, a seven percent increase from 929 operating days recorded in the third quarter of 2021.
Adjusted EBITDA for the third quarter of 2022 was $105.4 million, a 76 percent increase from Adjusted EBITDA of $59.8 million for the third quarter of 2021.
Funds flow from operations for the third quarter of 2022 increased 84 percent to $103.3 million from $56.2 million in the third quarter of the prior year.
During the third quarter of 2022, the Company did not record any Canada Emergency Wage Subsidy program payments as compared with $5.3 million recognized in the third quarter of 2021.
General and administrative expense on a per operating day basis decreased by eight percent and totaled $12.8 million (2.9 percent of revenue) in the third quarter of 2022, compared with $10.0 million (3.7 percent of revenue) in the third quarter of 2021.
Net capital purchases for the third quarter of 2022 were $46.9 million, consisting of $18.4 million in upgrade capital and $28.5 million in maintenance capital.
Capital expenditures for the 2022 year are targeted to be approximately $165.0 million of which $60.0 million relates to upgrade and growth capital. Within the upgrade and growth capital, two drilling rigs will be reactivated in Oman in the fourth quarter of 2022, as well as a third in the first half of 2023. In addition, as at September 30, 2022, 31 drilling rigs have been reactivated and upgraded during 2022.
Long-term debt, net of cash, was reduced by $25.1 million since December 31, 2021.
In the nine months ended September 30, 2022, a total of five rigs have been contracted or re-contracted in the Company's Middle East division. By mid-2023, the Company expects seven of the eight marketed rigs in the Middle East will be active and operating on long-term contracts.
Subsequent to September 30, 2022, the Company announced the sale of its Canadian directional drilling business, including all operating assets and personnel, for a purchase price of $5.0 million to Cathedral Energy Services Ltd. ("Cathedral"). The purchase price has been satisfied through the issuance of 7,017,988 common shares of Cathedral that were conveyed to the Company.
The Company is also pleased to announce the publication of their second annual Sustainability Report for the year-ended December 30, 2021. The report, available at esg.ensignenergy.com, highlights the Company's environmental, social, and governance ("ESG") performance over the past year. The report enhances ESG disclosure on diversity and inclusion, ESG governance, supply chain governance, and innovative emission reducing solutions.

OVERVIEW

Revenue for the third quarter of 2022 was $432.6 million, a 61 percent increase from $268.6 million in revenue for the third quarter of 2021. Revenue for the nine months ended September 30, 2022, was $1,109.3 million, an increase of 59 percent from revenue for the nine months ended September 30, 2021, of $699.4 million.

Adjusted EBITDA totaled $105.4 million ($0.54 per common share) in the third quarter of 2022, 76 percent higher than Adjusted EBITDA of $59.8 million ($0.37 per common share) in the third quarter of 2021. For the first nine months ended September 30, 2022, Adjusted EBITDA totaled $243.7 million ($1.37 per common share), 57 percent higher than Adjusted EBITDA of $155.3 million ($0.96 per common share) in the first nine months ended September 30, 2021.

Net income attributable to common shareholders for the third quarter of 2022 was $17.8 million ($0.11 per common share) compared to a net loss attributable to common shareholders of $34.4 million ($0.21 per common share) for the third quarter of 2021. Net loss attributable to common shareholders for the nine months ended September 30, 2022, was $3.8 million ($0.02 per common share), compared to a net loss attributable to common shareholders of $130.2 million ($0.80 per common share) for the nine months ended September 30, 2021.

Funds flow from operations increased 84 percent to $103.3 million ($0.53 per common share) in the third quarter of 2022 compared to $56.2 million ($0.35 per common share) in the third quarter of the prior year. Funds flow from operations increased 82 percent to $261.6 million ($1.47 per common share) for the nine months ended September 30, 2022, compared to $144.1 million ($0.89 per common share) for the nine months ended September 30, 2021.

While the macro-economic conditions impacting the crude oil and natural gas industry continue to fluctuate, the general outlook for oilfield services continues to be positive reflecting year-over-year increases in oilfield services demand and activity. Global inflationary concerns have continued to prompt central banks to tighten monetary policies. Increasing interest rates, largely resulting from efforts to quell rising inflation, have subsequently led to uncertainty for global economies regarding recession risk and contracting economic growth. These factors continue to impact global energy commodity prices and add uncertainty to the macro-outlook over the short-term.

However, despite the recent pull back in global crude oil commodity prices, demand for crude oil continues to improve year-over-year. Furthermore, OPEC+ nations continue to moderate supply and most recently announced supply cuts to current output, further tightening supply. Tight supply, coupled with positive commodity prices, have resulted in increased demand for oilfield services, driving both improved activity and drilling rig rates in the Company's North American segments year-over-year.

Over the near term, there is considerable uncertainty regarding the impacts of ongoing hostilities in Ukraine on the global economy, overall economic health and recession risk in certain of our operating environments. Furthermore, there are a myriad of other factors that may impact the demand for crude oil and natural gas, commodity prices, and the demand for oilfield services.

The Company's operating days were higher in the three and nine months ended September 30, 2022, when compared to the same periods in 2021. Operations were positively impacted by supportive industry conditions, driving activity improvements year-over-year.

The average United States dollar exchange rate was $1.28 for the nine months ended September 30, 2022 (2021 - $1.25) versus the Canadian dollar, an increase of two percent, compared to the same period of 2021.

The Company's working capital at September 30, 2022, was a surplus of $136.4 million, compared to a surplus of $104.2 million at December 31, 2021. The Company's available liquidity, consisting of cash and available borrowings under its $900.0 million revolving credit facility (the "Credit Facility"), was $48.0 million at September 30, 2022.

This news release contains "forward-looking information and statements" within the meaning of applicable securities legislation. For a full disclosure of the forward-looking information and statements and the risks to which they are subject, see the "Advisory Regarding Forward-Looking Statements" later in this news release. This news release contains references to Adjusted EBITDA and Adjusted EBITDA per common share. These measures do not have any standardized meaning prescribed by IFRS and accordingly, may not be comparable to similar measures used by other companies. The non-GAAP measures included in this news release should not be considered as an alternative to, or more meaningful than, the IFRS measure from which they are derived or to which they are compared. See "Non-GAAP Measures" later in this news release.

FINANCIAL AND OPERATING HIGHLIGHTS

(Unaudited, in thousands of Canadian dollars, except per common share data and operating information)

	Three months ended September 30			Nine months ended September 30
	2022	2021	% change	2022	2021	% change
Revenue	$ 432,550	$ 268,578	61	$ 1,109,349	$ 699,428	59
Adjusted EBITDA ¹	105,358	59,769	76	243,655	155,312	57
Adjusted EBITDA per common share ¹
Basic	$0.54	$0.37	46	$1.37	$0.96	43
Diluted	$0.54	$0.36	50	$1.36	$0.95	43
Net income (loss) attributable to common shareholders	17,782	(34,398)	nm	(3,769)	(130,240)	(97)
Net income (loss) attributable to common shareholders per common share
Basic	$0.11	$(0.21)	nm	$(0.02)	$(0.80)	(97)
Diluted	$0.11	$(0.21)	nm	$(0.02)	$(0.80)	(98)
Cash provided by operating activities	44,353	59,399	(25)	198,465	139,421	42
Funds flow from operations	103,321	56,198	84	261,595	144,051	82
Funds flow from operations per common share
Basic	$0.53	$0.35	51	$1.47	$0.89	65
Diluted	$0.52	$0.34	53	$1.46	$0.88	66
Long-term debt, net of cash	1,415,520	1,418,997	—	1,415,520	1,418,997	—
Weighted average common shares - basic (000s)	183,713	162,481	13	178,246	162,385	10
Weighted average common shares - diluted (000s)	185,131	163,444	13	179,520	162,845	10
Drilling	2022	2021	% change	2022	2021	% change
Number of marketed rigs²
Canada³	123	127	(3)	123	127	(3)
United States	89	93	(4)	89	93	(4)
International ⁴	34	42	(19)	34	42	(19)
Total	246	262	(6)	246	262	(6)

Operating days ⁵
Canada ³	4,009	2,846	41	10,106	5,750	76
United States	4,937	3,074	61	12,902	8,554	51
International ⁴	996	929	7	2,899	2,632	10
Total	9,942	6,849	45	25,907	16,936	53
Well Servicing	2022	2021	% change	2022	2021	% change
Number of rigs
Canada	52	52	—	52	52	—
United States	48	48	—	48	48	—
Total	100	100	—	100	100	—
Operating hours
Canada	12,857	9,316	38	36,216	26,433	37
United States	32,877	32,452	1	93,291	95,497	(2)
Total	45,734	41,768	9	129,507	121,930	6

nm	- calculation not meaningful
1.	Refer to Adjusted EBITDA calculation in Non-GAAP Measures
2.	Total owned rigs: Canada - 137, United States - 126, International - 46 (2021 total owned rigs: Canada - 153, United States - 136, International - 53)
3.	Excludes coring rigs.
4.	Includes workover rigs.
5.	Defined as contract drilling days, between spud to rig release.

FINANCIAL POSITION AND CAPITAL EXPENDITURES HIGHLIGHTS

As at ($ thousands)	September 30 2022	December 31 2021	September 30 2021
Working capital ^{1, 2}	136,435	104,228	79,311
Cash	29,994	13,305	24,326
Long-term debt	1,445,514	1,453,884	1,443,323
Long-term debt, net of cash	1,415,520	1,440,579	1,418,997
Total long-term financial liabilities ²	1,458,352	1,465,858	1,453,404
Total assets	3,176,408	2,977,054	3,006,840
Long-term debt to long-term debt plus equity ratio	0.53	0.55	0.54

¹	See Non-GAAP Measures section.
²	Comparative working capital and total long-term financial liabilities has been revised to conform with current year's presentation

Three months ended September 30

Nine months ended September 30

($ thousands)

2022

2021

% change

2022

2021

% change

Capital expenditures