AKITA Drilling Ltd. Announces Third Quarter Results

CALGARY, Nov. 1 /CNW/ - AKITA Drilling Ltd.'s net earnings for the three months ended September 30, 2010 were $1,814,000 ($0.10 per share) on revenue of $25,860,000 compared to $752,000 ($0.04 per share) on revenue of $20,871,000 for the corresponding period in 2009.  Funds flow from operations for the quarter ended September 30, 2010 was $7,258,000 compared to $3,169,000 in the corresponding quarter in 2009.

Earnings for the nine months ended September 30, 2010 were $2,262,000 ($0.12 per share) on revenue of $78,452,000.  Comparative figures for 2009 were earnings of $5,215,000 ($0.29 per share) on revenue of $80,448,000.  Funds flow from operations for the period was $18,082,000 compared to $17,970,000 in the corresponding nine month period in 2009.

Drilling activity has recovered from the all time lows seen in the third quarter of 2009.  While activity levels have improved, day rates still trail last year and remain well below levels experienced in the peak years of 2006 and 2007. Operating statistics for the first nine months of 2010 and 2009 are as follows:

		Number of Drilling Rigs		Operating Days	Operating Days
		Gross	Net	(Third Quarter)	(Year-to-Date)
Canadian Operations	2010	37	34.225	1,382	3,938
	2009	39	36.225	808	2,875
U.S. Operations	2010	2	1.0	5	23
	2009	2	1.0	185	395
Total	2010	39	35.225	1,387	3,961
	2009	41	37.225	993	3,270

Pad drilling continues to be the most active aspect of the current drilling market.  AKITA is actively pursuing pad rig opportunities and is currently retrofitting two of its conventional rigs and upgrading one additional pad rig in order to meet market demand.  By the end of the year, the Company will have 11 pad rigs in its fleet.  In addition, the Company was recently awarded a contract to construct a new pad rig for delivery next year. 

Selected financial information for the Company is as follows:

Consolidated Balance Sheets
Unaudited			September 30			December 31
($000's)			2010	2009		2009
ASSETS
Current assets
	Cash and cash equivalents		$    41,073	$        56,547		$        34,142
	Term deposits		18,000	-		18,000
	Accounts receivable		22,125	19,351		28,523
	Income taxes recoverable		-	1,219		330
	Other		688	1,126		421
			81,886	78,243		81,416
Restricted cash			2,500	5,000		5,000
Capital assets			147,341	150,401		147,799
			$  231,727	$      233,644		$      234,215
LIABILITIES
Current liabilities
	Accounts payable and accrued liabilities		$      9,729	$           9,082		$        10,123
	Dividends payable		1,266	1,276		1,277
	Income taxes payable		263	-		-
	Deferred revenue		985	1,148		197
	Current portion of pension liability		-	157		-
			12,243	11,663		11,597
Future income taxes			19,492	20,177		20,041
Pension liability			1,205	2,339		1,131
			32,940	34,179		32,769
CLASS A AND CLASS B SHAREHOLDERS' EQUITY
Class A and Class B shares			23,199	23,359		23,376
Contributed surplus			2,462	2,271		2,271
Accumulated other comprehensive income			(340)	(430)		(354)
Retained earnings			173,466	174,265		176,153
			198,787	199,465		201,446
			$  231,727	$      233,644		$      234,215

Consolidated Statements of Earnings
and Retained Earnings
Unaudited			Three Months			Nine Months
($000's)			Ended			Ended
			September 30			September 30
			2010	2009		2010	2009
REVENUE			$   25,860	$       20,871		$   78,452	$       80,448
COSTS AND EXPENSES
	Operating and maintenance		14,721	14,852		49,346	50,951
	Depreciation		5,353	3,586		16,154	12,833
	Selling and administrative		3,333	1,311		10,151	9,368
			23,407	19,749		75,651	73,152
REVENUE LESS COSTS AND EXPENSES			2,453	1,122		2,801	7,296
OTHER INCOME (EXPENSE)
	Interest income		176	115		550	403
	Gain on sale of joint venture interests in rigs and other assets		4	-		50	79
	Gain (loss) on foreign currency translation		(3)	(136)		19	(231)
			177	(21)		619	251
EARNINGS BEFORE INCOME TAXES			2,630	1,101		3,420	7,547
INCOME TAXES
	Current		882	44		1,712	710
	Future		(66)	305		(554)	1,622
			816	349		1,158	2,332
NET EARNINGS			1,814	752		2,262	5,215
Retained earnings, beginning of period			172,912	174,789		176,153	172,878
Dividends declared			(1,260)	(1,276)		(3,812)	(3,828)
Adjustment on repurchase and
	cancellation of share capital		-	-		(1,137)	-
RETAINED EARNINGS, END OF PERIOD			$ 173,466	$     174,265		$ 173,466	$     174,265
Earnings per Class A and Class B share
	Basic		$       0.10	$            0.04		$       0.12	$            0.29
	Diluted		$       0.10	$            0.04		$       0.12	$            0.29

Consolidated Statements of Cash Flows
Unaudited			Three Months			Nine Months
($000's)			Ended			Ended
			September 30			September 30
			2010	2009		2010	2009
OPERATING ACTIVITIES
Net earnings			$     1,814	$             752		$     2,262	$         5,215
Non-cash items included in net earnings
	Depreciation		5,353	3,586		16,154	12,833
	Future income taxes		(49)	225		(549)	1,359
	Expense for defined benefit pension plan		25	(1,394)		74	(1,358)
	Stock options charged to expense		119	-		191	-
	Gain on sale of joint venture interests in rigs and other assets		(4)	-		(50)	(79)
Funds flow from operations*			7,258	3,169		18,082	17,970
Change in non-cash working capital			3,870	1,755		7,092	10,731
			11,128	4,924		25,174	28,701
INVESTING ACTIVITIES
Capital expenditures			(7,832)	(1,955)		(15,755)	(10,301)
Reduction in cash restricted for loan guarantees			-	-		2,500	-
Proceeds on sale of joint venture interests in rigs and other assets			4	-		109	190
Change in non-cash working capital			(539)	-		15	-
			(8,367)	(1,955)		(13,131)	(10,111)
FINANCING ACTIVITIES
Dividends paid			(1,260)	(1,276)		(3,812)	(3,828)
Repurchase of share capital			-	-		(1,346)	-
Proceeds received on exercise of stock options			-	-		32	47
			(1,260)	(1,276)		(5,126)	(3,781)
FOREIGN CURRENCY TRANSLATION			39	(178)		14	(430)
INCREASE (DECREASE) IN CASH			1,540	1,515		6,931	14,379
Cash position, beginning of period			39,533	55,032		34,142	42,168
CASH POSITION, END OF PERIOD			$   41,073	$       56,547		$   41,073	$       56,547
Interest paid during the period			$          14	$                 9		$          17	$               24
Income taxes paid during the period (net of refunds)			$        (34)	$             439		$     1,119	$         4,126
* Funds flow from operations is not a recognized measure under Canadian Generally Accepted Accounting Principles.

Consolidated Statements of Comprehensive Income
Unaudited			Three Months			Nine Months
($000's)			Ended			Ended
			September 30			September 30
			2010	2009		2010	2009
NET EARNINGS			$     1,814	$             752		$     2,262	$         5,215
OTHER COMPREHENSIVE INCOME
	Foreign currency translation adjustment		39	(178)		14	(430)
COMPREHENSIVE INCOME			$     1,853	$             574		$     2,276	$         4,785

FORWARD-LOOKING STATEMENTS

From time to time Akita Drilling Ltd. ("AKITA" or the "Company") makes written and verbal forward-looking statements. These forward-looking statements include but are not limited to comments with respect to our objectives and strategies, financial condition, the results of our operations and our business, our outlook for our industry and our risk management discussion. Forward looking statements are typically identified with words such as "believe", "expect", "forecast", "anticipate", "intend", "estimate", "plan" and "project" and similar expressions of future or conditional events such as "will", "may", "should", "could" or "would".

By their nature these forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not be achieved. We caution readers of this News Release not to place undue reliance on these forward-looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements.

Forward-looking statements may be influenced by the following factors: the level of exploration and development activity carried on by AKITA's customers, world oil and North American natural gas prices, weather, access to capital markets and government policies. We caution that the foregoing list of important factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to AKITA, investors and others should carefully consider the foregoing factors as well as other uncertainties and events.

%SEDAR: 00002868E

For further information:

Murray Roth
Vice President, Finance and Chief Financial Officer
[phone]
website: http://www.akita-drilling.com