Trinidad Drilling Ltd. reports solid fourth quarter and year-end 2013 results; growing diversification and a flexible financial position back up future growth
/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/
TSX SYMBOL: TDG
CALGARY, March 5, 2014 /CNW/ - Trinidad Drilling Ltd. ("Trinidad" or "the Company") reported solid 2013 results; growing diversification and a flexible financial position prepare the Company well for future growth.
"This past year has been an important year for Trinidad," said Lyle Whitmarsh, Trinidad's Chief Executive Officer. "Our fleet of modern, efficient rigs has continued to perform well despite some industry weakness, while we have also readied the Company for future growth. In 2013, we have demonstrated ourselves as a key player in the growing Canadian LNG development. We have also set the Company up for long-term international expansion through our joint venture with Halliburton and our improved financial flexibility. These advancements and our continued focus on our existing North American operations position us well for future success in 2014 and beyond."
(1) Please see the Non-GAAP Measures Definitions section of this document for further details.
FINANCIAL HIGHLIGHTS
Three months ended December 31, | For the years ended December 31, | ||||||
($ thousands except share and per share data) | 2013 | 2012 | % Change | 2013 | 2012 | % Change | |
Revenue | 224,563 | 209,557 | 7.2 | 845,888 | 859,327 | (1.6) | |
Revenue, net of third party costs | 209,961 | 196,103 | 7.1 | 791,251 | 803,546 | (1.5) | |
Operating income (1) | 99,607 | 77,758 | 28.1 | 329,807 | 329,151 | 0.2 | |
Operating income percentage (1) | 44.4% | 37.1% | 19.7 | 39.0% | 38.3% | 1.8 | |
Operating income - net percentage (1) | 47.0% | 39.7% | 18.4 | 41.6% | 41.0% | 1.5 | |
EBITDA (1) | 81,246 | 4,825 | 1,583.9 | 255,221 | 205,347 | 24.3 | |
Per share (diluted) (2) | 0.65 | 0.04 | 1,525.0 | 2.09 | 1.70 | 22.9 | |
Adjusted EBITDA (1) | 83,830 | 63,332 | 32.4 | 270,445 | 277,015 | (2.4) | |
Per share (diluted) (2) | 0.67 | 0.52 | 28.8 | 2.22 | 2.29 | (3.1) | |
Cash provided by operations | 102,905 | 75,661 | 36.0 | 299,013 | 259,005 | 15.4 | |
Per share (basic / diluted) (2) | 0.83 | 0.63 | 31.7 | 2.45 | 2.14 | 14.5 | |
Funds provided by operations (1) | 83,328 | 60,915 | 36.8 | 231,135 | 235,240 | (1.7) | |
Per share (basic / diluted) (2) | 0.67 | 0.50 | 34.0 | 1.89 | 1.95 | (3.1) | |
Net earnings | 28,690 | (12,246) | 334.3 | 70,952 | 55,038 | 28.9 | |
Per share (basic / diluted) (2) | 0.23 | (0.10) | 330.0 | 0.58 | 0.46 | 26.1 | |
Adjusted net earnings (1) | 31,221 | 57,807 | (46.0) | 84,835 | 138,547 | (38.8) | |
Per share (basic / diluted) (2) | 0.25 | 0.48 | (47.9) | 0.69 | 1.15 | (40.0) | |
Capital expenditures - net of dispositions | 39,791 | 16,763 | 137.4 | 76,793 | 163,199 | (52.9) | |
Dividends declared | 6,907 | 6,043 | 14.3 | 25,036 | 24,172 | 3.6 | |
Shares outstanding - basic | |||||||
(weighted average) (2) | 123,870,307 | 120,859,476 | 2.5 | 121,619,238 | 120,859,476 | 0.6 | |
Shares outstanding - diluted | |||||||
(weighted average) (2) | 124,688,504 | 120,859,476 | 3.2 | 122,092,835 | 120,859,476 | 1.0 | |
As at December 31, | |||||||
($ thousands except percentage data) | 2013 | 2012 | % Change | ||||
Total assets | 1,827,496 | 1,541,294 | 18.6 | ||||
Total long-term liabilities | 564,095 | 585,629 | (3.7) |
(1) | Readers are cautioned that Operating income, Operating income percentage, Operating income - net percentage, EBITDA, Adjusted EBITDA, Funds provided by operations, Adjusted net earnings and the related per share information do not have standardized meanings prescribed by IFRS - see "Non-GAAP Measures" and "Additional GAAP Measures". |
(2) | Basic shares include the weighted average number of shares outstanding over the period. Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, of the number of shares issuable pursuant to the Incentive Option Plan. |
OPERATING HIGHLIGHTS
Three months ended December 31, | For the years ended December 31, | |||||||
2013 | 2012 | % Change | 2013 | 2012 | % Change | |||
Land Drilling Market | ||||||||
Operating days (1) | ||||||||
Canada | 2,935 | 2,915 | 0.7 | 11,585 | 11,543 | 0.4 | ||
United States and International | 4,470 | 4,789 | (6.7) | 18,234 | 20,378 | (10.5) | ||
Rate per operating day (1) | ||||||||
Canada (CDN$) | 25,102 | 26,190 | (4.2) | 24,892 | 24,637 | 1.0 | ||
United States and International (CDN$) | 27,243 | 22,305 | 22.1 | 23,951 | 22,335 | 7.2 | ||
United States and International (US$) | 26,213 | 22,589 | 16.0 | 23,381 | 22,285 | 4.9 | ||
Utilization rate - operating day (1) | ||||||||
Canada | 52% | 56% | (6.6) | 53% | 56% | (6.2) | ||
United States and International | 71% | 77% | (7.2) | 73% | 83% | (11.5) | ||
Number of drilling rigs at period end | ||||||||
Canada | 61 | 59 | 3.4 | 61 | 59 | 3.4 | ||
United States and International | 64 | 68 | (5.9) | 64 | 68 | (5.9) | ||
Coring and surface casing rigs (2) | - | 15 | - | - | 15 | - | ||
Barge Drilling Market | ||||||||
Operating days (1) | 394 | 386 | 2.0 | 1,703 | 1,555 | 9.5 | ||
Rate per operating day (CDN$) (1) | 34,810 | 29,954 | 16.2 | 32,388 | 28,669 | 13.0 | ||
Rate per operating day (US$) (1) | 33,490 | 30,330 | 10.4 | 31,605 | 28,612 | 10.5 | ||
Utilization rate - operating day (1) | 86% | 84% | 1.9 | 93% | 85% | 9.7 | ||
Number of barge drilling rigs at period end | 2 | 2 | - | 2 | 2 | - | ||
Number of barge drilling rigs under Bareboat | ||||||||
Charter Agreements at period end | 3 | 3 | - | 3 | 3 | - | ||
(1) | See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details. | ||||||
(2) | In the third quarter of 2013, Trinidad disposed of its 15 remaining coring rigs and all related equipment. |
OVERVIEW
In both the Canadian and US markets, oil and gas companies placed increasing importance on rig efficiency and performance in 2013. Demand for modern, high performance rigs remained strong, while older, conventional style equipment became more difficult to contract and was impacted by downward pricing pressure. With more than three-quarters of Trinidad's fleet classified as high-performance rigs, the Company's operations were less impacted than the industry as a whole, and as a result, its activity levels continued to outperform the industry and its dayrates remained strong.
Crude oil prices improved slightly in 2013 over the previous year and drilling activity across North America continued to focus on crude oil and natural gas liquids targets. By contrast, natural gas prices improved considerably in 2013, with both AECO and Henry Hub prices averaging more than 30% higher than those recorded in 2012. This change was largely driven by lower storage levels in 2013 as a result of less natural gas directed drilling and colder than usual weather conditions in North America.
In 2013, Canadian industry activity levels averaged 40%, relatively unchanged from the previous year; however, the timing during the year varied. In the US, industry activity remained stable throughout 2013, averaging 1,685 active rigs but was lower than the 1,852 active rigs averaged in 2012.
INDUSTRY STATISTICS
Full Year | 2013 | Full Year | 2012 | ||||||||
2013 | Q4 | Q3 | Q2 | Q1 | 2012 | Q4 | Q3 | Q2 | Q1 | ||
Commodity Prices | |||||||||||
Aeco natural gas price (CDN$ per gigajoule) | 3.01 | 3.33 | 2.32 | 3.36 | 3.03 | 2.26 | 3.03 | 2.18 | 1.81 | 2.01 | |
Henry Hub natural gas price (US$ per mmBtu) | 3.72 | 3.84 | 3.55 | 4.01 | 3.47 | 2.75 | 3.40 | 2.88 | 2.29 | 2.43 | |
Western Canada Select crude oil price | |||||||||||
(CDN$ per barrel) | 75.84 | 69.62 | 86.31 | 79.25 | 67.64 | 71.70 | 60.73 | 76.29 | 74.10 | 75.91 | |
WTI crude oil price (US$ per barrel) | 98.01 | 97.56 | 105.82 | 94.14 | 94.30 | 94.09 | 88.17 | 92.15 | 93.30 | 102.99 | |
US Activity | |||||||||||
Average industry active land rig count (1) | 1,685 | 1,679 | 1,687 | 1,686 | 1,687 | 1,852 | 1,741 | 1,837 | 1,902 | 1,929 | |
Average Trinidad active land rig count (2) | 50 | 49 | 51 | 50 | 49 | 57 | 56 | 55 | 58 | 58 | |
Canadian Activity | |||||||||||
Average industry utilization (3) | 40% | 43% | 37% | 18% | 58% | 39% | 36% | 42% | 18% | 65% | |
Average Trinidad utilization (4) | 48% | 48% | 50% | 24% | 73% | 52% | 51% | 58% | 24% | 77% |
(1) | Baker Hughes rig counts (information obtained from Tudor Pickering Holt & Company weekly rig roundup report). | |||||||||
(2) | Includes US and international rigs. | |||||||||
(3) | Canadian Association of Oilwell drilling Contractors (CAODC) utilization. | |||||||||
(4) | Based on drilling days (spud to rig release dates). |
In 2013, Trinidad's operations generated adjusted EBITDA that was mostly in line with 2012, recording higher dayrates and operating margins despite weaker activity levels. In addition, net earnings increased to $71.0 million in 2013, up 28.9% or $0.12 per share compared to 2012.
During the fourth quarter of 2013, Trinidad received early termination revenue of $19.6 million. This payment mainly related to contracts on five US rigs with terms extending into 2014 and 2015. These rigs are all modern, high performance rigs that remain in high demand. This payment was driven by specific customer-related matters and Trinidad does not expect this to be a continuing trend in 2014. Trinidad's US and international dayrates, adjusted EBITDA and net earnings all increased as a result of this payment as there were no associated operating days or operating costs with the early termination revenue.
In addition to solid operational performance in 2013, this past year has been a pivotal year in Trinidad's strategic development with the Company achieving several important milestones in its long-term plan.
One of Trinidad's most important achievements in 2013 was the joint venture arrangement it signed with a wholly-owned subsidiary of Halliburton Company (Halliburton). Through its joint venture, Trinidad has the first right to supply Halliburton with drilling rigs for any of its integrated projects outside of Canada or the US. To date, Trinidad has agreed to operate eight rigs through the joint venture; four in Saudi Arabia and four in Mexico. Currently Halliburton operates more than 100 rigs worldwide, providing the joint venture, and Trinidad, with an important opportunity for expansion over the coming years.
During the year, Trinidad won a construction award for a liquefied natural gas (LNG) related rig. The Company is currently building a rig destined for the Liard basin in northern Canada where it will be drilling wells to supply natural gas to a proposed LNG plant on a five-year, take-or-pay contract. This rig is expected to be delivered into operations later in 2014 and once completed will be one of the largest and most technically advanced land drilling rigs in Canada.
During 2013, Trinidad continued to dispose of non-core assets and sold its coring rigs and related assets (the "Titan assets"). The work for these rigs was very seasonal in nature and generated limited operating margin over the full year. By selling this equipment Trinidad was able to narrow the focus of its operations and concentrate on high-performance drilling which typically generates higher margins.
In addition to ensuring Trinidad has the right assets to perform well in the future, the Company has also remained focused on improving its capital structure. For the past few years, Trinidad has been very selective in the growth opportunities it has pursued and has remained committed to reducing its leverage. Trinidad's debt reduction program is largely completed now, leaving it in a flexible financial position and ready for the next stage of its expansion.
FOURTH QUARTER 2013 HIGHLIGHTS
- Adjusted EBITDA in the fourth quarter was $83.8 million, up 32.4% from the same quarter last year and 35.6% in the third quarter of 2013. Increased early termination and standby revenues received in the US and international operations, combined with lower costs in the Canadian operations increased the profitability in each segment.
- Operating income - net percentage was 47.0% in the fourth quarter of 2013, up from 38.5% in the third quarter of 2013 and 39.7% in the fourth quarter of 2012. Operating income - net percentage increased from the fourth quarter of 2012 and the third quarter of 2013 largely as a result of factors affecting adjusted EBITDA discussed above.
- Net earnings was $28.8 million in the fourth quarter of 2013, up by $41.2 million from the comparative period in 2012. Increased revenue in the US and international operations and reduced costs in the Canadian operations increased profitability in the fourth quarter of 2013. Additionally, the fourth quarter of 2012 included an impairment expense of $70.1 million mainly related to Trinidad's lower specification equipment, compared to nil in the current quarter.
- Adjusted net earnings in the fourth quarter was $31.2 million, down $26.6 million from the fourth quarter of 2012. Adjusted net earnings was higher in 2012 due to the adjustment related to impairment, which is added back in this calculation. Adjusted net earnings in the fourth quarter of 2013 was up $15.8 million from the third quarter of 2013. Increased revenues generated in the US and international operations combined with improved profitability in the Canadian operations increased adjusted net earnings in the current period.
- Effective December 16, 2013, Trinidad closed a bought equity financing deal issuing 17,250,000 shares for gross proceeds of $172.5 million. Proceeds from the equity financing are expected to fund Trinidad's international and domestic growth initiatives, as well as to fund the current fleet upgrade program for 2014.
- Trinidad continued to repay debt throughout 2013 and in the fourth quarter of 2013, lowering both the Canadian dollar revolving facility and US dollar revolving facility to nil. Total Debt to Bank EBITDA was reduced to 1.80 times, compared to 1.92 times at the end of the third quarter of 2013 and 1.91 times at the end of 2012.
FULL YEAR 2013 HIGHLIGHTS
- Trinidad generated revenue of $845.9 million in 2013, down $13.4 million and 1.6% from 2012. The impact of lower operating days in the US and international segment in 2013 was largely offset by higher dayrates due to a higher rig count and shift in the rig mix in Canada, combined with early termination revenue in the US operations.
- Operating income - net percentage was 41.6% in 2013, compared to 41.0% in 2012. Operating income - net percentage for the first three quarters of 2013 was lower than each of these quarters in the prior year due to lower activity levels. However, early termination and standby revenues received in the fourth quarter of 2013 increased the overall annual profitability and caused year over year operating income - net percentage to stay fairly consistent.
- Adjusted EBITDA was $270.4 million in 2013, down 2.4% from 2012. Adjusted EBITDA decreased in 2013 largely as a result of lower activity levels in the current year.
- Net earnings in 2013 were $71.0 million or $0.58 per share (diluted), up 28.9% from 2012. Net earnings increased largely as a result of lower impairment on property and equipment recorded in 2013, partially reduced by higher general and administrative expenses, a loss on sale of property and equipment in 2013 compared to a gain in 2012 and higher income taxes in the current year.
- Adjusted net earnings decreased by $53.7 million in 2013 compared to the prior year, with adjusted net earnings per share (diluted) decreasing $0.46 per share. Adjusted net earnings decreased in the current year due to increased G&A expenses, increased depreciation, a loss on sale of property and equipment recognized in 2013 versus a gain in 2012 and higher income tax expenses in the current year.
- During the year, Trinidad added two newly built rigs to its Canadian land drilling division, both under long-term, take-or-pay contracts.
- Effective September 3, 2013, Trinidad signed a joint venture arrangement with Halliburton giving Trinidad the first right to supply Halliburton with drilling rigs for any of its integrated projects outside of Canada and the US. To date, Trinidad has agreed to operate eight rigs through this arrangement, four in Saudi Arabia and four in Mexico. Each of these rigs will be operating under three-year, take-or-pay contracts, with optional one year extensions.
- Effective December 16, 2013, Trinidad closed a bought equity financing deal issuing 17,250,000 shares for gross proceeds of $172.5 million. Proceeds from the equity financing are expected to fund Trinidad's international and domestic growth initiatives, as well as to fund the current fleet upgrade program for 2014.
- As of December 31, 2013, Trinidad's US and Canadian credit facilities were completely paid off and the Company's only long-term debt consisted of Senior Notes. Total debt to bank EBITDA was 1:80 times, compared to 1:91 times at December 31, 2012.
RESULTS FROM OPERATIONS
Canadian Operations
Three months ended December 31, | For the years ended December 31, | ||||||
($ thousands except percentage and operating data) | 2013 | 2012 | % Change | 2013 | 2012 | % Change | |
Operating revenue (1, 2) | 73,856 | 77,577 | (4.8) | 298,510 | 303,500 | (1.6) | |
Other revenue | 64 | 120 | (46.7) | 125 | 414 | (69.8) | |
73,920 | 77,697 | (4.9) | 298,635 | 303,914 | (1.7) | ||
Operating costs (1, 2) | 40,616 | 47,308 | (14.1) | 172,223 | 177,111 | (2.8) | |
Operating income (4) | 33,304 | 30,389 | 9.6 | 126,412 | 126,803 | (0.3) | |
Operating income - net percentage (4) | 45.1% | 39.1% | 42.3% | 41.7% | |||
Operating days (4) | 2,935 | 2,915 | 0.7 | 11,585 | 11,543 | 0.4 | |
Drilling days (4) | 2,674 | 2,677 | (0.1) | 10,659 | 10,646 | 0.1 | |
Rate per operating day (CDN$) (4) | 25,102 | 26,190 | (4.2) | 24,892 | 24,637 | 1.0 | |
Utilization rate - operating day (4) | 52% | 56% | (6.6) | 53% | 56% | (6.2) | |
Utilization rate - drilling day (4) | 48% | 51% | (6.6) | 48% | 52% | (7.0) | |
CAODC industry average (3) | 48% | 36% | 34.0 | 40% | 39% | 2.6 | |
Number of drilling rigs at period end | 61 | 59 | 3.4 | 61 | 59 | 3.4 | |
Number of coring and surface rigs | |||||||
at period end | - | 15 | - | - | 15 | - |
(1) | Inter-segment revenue and operating costs have been excluded of ($0.5) million for the three months ended December 31, 2013, and $0.1 million for the three months ended December 31, 2012. Inter-segment revenue and operating costs for the twelve months ended December 31, 2013 and 2012 have been excluded of $2.6 million and $9.6 million, respectively. Each of these inter-segment revenue and operating costs relates to expenses incurred in the manufacturing division. |
(2) | Operating revenue and operating costs exclude third party recovery and third party costs of $8.5 million for the three months ended December 31, 2013, and $9.8 million for the three months ended December 31, 2012. Operating revenue and operating costs for the twelve months ended December 31, 2013 and 2012 exclude third party recovery and third party costs of $32.2 million and $37.5 million, respectively. |
(3) | CAODC industry average is based on drilling days divided by total days available. |
(4) | See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details. |
Fourth Quarter 2013
During the fourth quarter of 2013, revenue in Trinidad's Canadian operations decreased by $3.8 million and 4.9% compared to the same quarter of 2012.
Lower revenue in the fourth quarter was largely driven by increased price competition and lower dayrates compared to the prior year. In the fourth quarter, dayrates were $1,088 per day lower than the same quarter last year. Revenue in the fourth quarter was also negatively impacted by the absence of revenue from the coring and pre-set drilling rigs which were sold early in the third quarter of 2013.
Utilization in the fourth quarter of 2013 averaged 52%, down from 56% in the same quarter last year. Weaker activity was driven by the competitive pricing conditions present in the quarter and customers completing their 2013 drilling programs earlier than expected. Despite the lower utilization in the fourth quarter, Trinidad recorded an additional 20 operating days than in the same period last year, due to the addition of two new rigs during the year.
Operating income in the fourth quarter increased by $2.9 million compared to the same quarter last year as the impact of lower operating costs more than offset lower revenue generation. Operating costs were lower in the quarter due to the absence of reactivation costs related to the coring division which generally occur in the fourth quarter of the year, combined with an inventory write-down in 2012 of $2.9 million related to non-core inventory in the manufacturing division. The increase in operating income led to higher operating income - net percentage of 45.1% in the fourth quarter of 2013 compared to 39.1% in the prior year.
When compared to the third quarter of 2013, operating income increased by $4.1 million and 13.9%, and operating income - net percentage increased to 45.1% from 40.5% from the third quarter. A slower than expected start to summer drilling caused by softening customer demand resulted in lower activity levels in the third quarter. As well, Trinidad had delayed repair and maintenance expenses generally incurred in the first and second quarter of the year, into the third quarter. In the fourth quarter, although Trinidad was still experiencing softening customer demand, the reduced operating expenses discussed above caused overall profitability to increase quarter over quarter.
Full Year 2013
For the year ended December 31, 2013, the Canadian drilling division performed relatively consistently compared to the prior year. Operating days and average dayrates in 2013 were largely unchanged from 2012; however, a weaker contribution from the Titan assets early in 2013 led to slightly lower revenue generation in 2013.
For the year ended December 31, 2013, average dayrates improved when compared to the prior year by $255 per day. Dayrates increased as a result of higher wage expenses in the current year due to the annual crew wage increase that occurred in the fourth quarter of 2012. These costs are typically passed through to the customer. In addition, dayrates increased due to a change in rig mix in 2013 caused by the addition of two new, high specification rigs, combined with lower activity levels on the Company's shallower equipment.
Trinidad's high performance, modern fleet continued to outperform industry activity levels, recording utilization levels that exceeded the industry average by eight percentage points for 2013. This is a reflection of the Company's strategic focus towards in-demand, high performance equipment backed by a strong customer base. Trinidad's 2013 utilization decreased by three percentage points when compared to 2012 due to an increase in rig count in the current year and weaker performance from some of the Company's shallower core-delineation equipment.
Although revenue showed a slight decline in the current year due to a lower contribution from the Titan assets, operating income - net percentage increased year over year to 42.3% from 41.7% in 2012. Lower operating expenses related to the Titan assets, particularly in the fourth quarter of 2013, combined with the absence of an inventory write-down in 2013 (write-down in the manufacturing division of $2.9 million in 2012) caused overall profitability in the Canadian division to improve year over year. Lower revenue and operating costs from the Titan assets reflect the sale of this equipment in 2013.
During the current year, Trinidad's active rig fleet increased by two rigs when compared to December 31, 2012, with one rig delivered in each of the first and third quarters of the current year. Both of these rigs were constructed at the Company's in-house manufacturing division and were put into service in the Duvernay shale under long-term, take-or-pay contracts.
During 2013, Trinidad signed a contract to build a new rig to drill wells for a northern Canada LNG project. The rig is expected to be completed and delivered into the Canadian operations in the second half of 2014 and will be operating under a five-year, take-or-pay contract. The manufacturing division also continued to work on upgrading the Company's existing fleet with the addition of moving systems, top drives and upgraded mud systems to ensure that these assets remain competitive in the current market.
Additionally, as part of the joint venture project, Trinidad's manufacturing division has signed a contract to build five new rigs, one for Saudi Arabia with expected delivery towards the second half of 2014, and four for Mexico with delivery expected towards the end of 2014 and early 2015. Additionally, three of Trinidad's existing rigs included in the US land drilling division will be upgraded and sold to the joint venture for operations in Saudi Arabia. Lastly, Trinidad has agreed to build a training rig for their joint venture partner with delivery expected towards the end of 2014.
By comparison, during the year ended December 31, 2012, Trinidad's manufacturing division had completed work on five new builds, each of these five rigs was put into service under long-term, take-or-pay contracts in the Company's Canadian drilling division. In addition, the division began work on two more new build rigs, both destined for work in the Duvernay shale in 2013.
At the end of the second quarter of 2013, Trinidad announced the sale of its coring and pre-set rigs, including all related inventory, for $12.0 million in cash. The decision to sell these assets was in line with the Company's strategy to divest assets that no longer fit Trinidad's future core business. The sale officially closed July 31, 2013.
United States and International Operations
Three months ended December 31, | For the years ended December 31, | |||||||
($ thousands except percentage and operating data) | 2013 | 2012 | % Change | 2013 | 2012 | % Change | ||
Operating revenue (1) | 135,520 | 118,398 | 14.5 | 492,022 | 499,852 | (1.6) | ||
Other revenue | 521 | 8 | 6,412.5 | 594 | (220) | 370.0 | ||
136,041 | 118,406 | 14.9 | 492,616 | 499,632 | (1.4) | |||
Operating costs (1) | 70,565 | 71,037 | (0.7) | 290,048 | 297,284 | (2.4) | ||
Operating income (2) | 65,476 | 47,369 | 38.2 | 202,568 | 202,348 | 0.1 | ||
Operating income - net percentage (2) | 48.1% | 40.0% | 41.1% | 40.5% | ||||
Land Drilling Rigs | ||||||||
Operating days (2) | 4,470 | 4,789 | (6.7) | 18,234 | 20,378 | (10.5) | ||
Drilling days (2) | 3,852 | 4,168 | (7.6) | 15,841 | 17,663 | (10.3) | ||
Rate per operating day (CDN$) (2) | 27,243 | 22,305 | 22.1 | 23,951 | 22,335 | 7.2 | ||
Rate per operating day (US$) (2) | 26,213 | 22,589 | 16.0 | 23,381 | 22,285 | 4.9 | ||
Utilization rate - operating day (2) | 71% | 77% | (7.2) | 73% | 83% | (11.5) | ||
Utilization rate - drilling day (2) | 62% | 67% | (8.1) | 64% | 72% | (11.4) | ||
Number of drilling rigs at period end | 64 | 68 | (5.9) | 64 | 68 | (5.9) | ||
Barge Drilling Rigs | ||||||||
Operating days (2) | 394 | 386 | 2.0 | 1,703 | 1,555 | 9.5 | ||
Rate per operating day (CDN$) (2) | 34,810 | 29,954 | 16.2 | 32,388 | 28,669 | 13.0 | ||
Rate per operating day (US$) (2) | 33,490 | 30,330 | 10.4 | 31,605 | 28,612 | 10.5 | ||
Utilization rate - operating day (2) | 86% | 84% | 1.9 | 93% | 85% | 9.7 | ||
Number of barge drilling rigs at period end | 2 | 2 | - | 2 | 2 | - | ||
Number of barge drilling rigs under | ||||||||
Bareboat Charter Agreements at period end | 3 | 3 | - | 3 | 3 | - | ||
(1) | Operating revenue and operating costs exclude third party recovery and third party costs of $5.3 million for the three months ended December 31, 2013, and $3.6 million for the three months ended December 31, 2012. Operating revenue and operating costs exclude third party recovery and third party costs of $21.6 million for the twelve months ended December 31, 2013, and $18.2 million for the twelve months ended December 31, 2012. | ||||||
(2) | See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details. |
Fourth Quarter 2013
Revenue increased in Trinidad's US and international operations in the fourth quarter of 2013 compared to the fourth quarter of 2012 by $17.6 million and 14.9%. The majority of this increase was due to standby and early termination revenues received during the quarter. For the three months ended December 31, 2013, the US and international segment received US$25.4 million in early termination and standby revenue, compared to US$3.9 million received in the fourth quarter of 2012.
A significant portion of the US$5.8 million of standby revenue received in the current quarter related to three existing US rigs being upgraded and sold to the joint venture. Additionally, Trinidad received early termination revenue of US$19.6 million in the fourth quarter mainly relating to five US rigs with terms extending into 2014 and 2015. These rigs are all modern, high performance rigs that remain in high demand. This additional revenue was offset by a reduced contribution from Trinidad's three Mexico rigs which completed their contracts at the end of the second quarter and were idle in the fourth quarter.
Dayrates in the fourth quarter of 2013 improved compared to the fourth quarter of 2012 with an increase of US$3,624 per day. The increase was mainly related to standby and early termination revenues in the period, which increased by US$4,819 per day quarter over quarter. Excluding the impact of standby and early termination revenue in the fourth quarter, dayrates lowered in the current quarter from the prior year and the third quarter of 2013 due to a competitive market which caused downward pressure on dayrates.
Activity levels in the fourth quarter of 2013 averaged 71% compared to 77% for the same quarter last year and 76% for the third quarter of 2013. Lower activity in the current quarter was largely driven by rigs being upgraded prior to being moved into Trinidad's international joint venture, early termination of contracts and idle rigs in the Company's Mexican operations.
Operating income and operating income - net percentage increased in the fourth quarter 2013 compared to the fourth quarter of 2012 and the third quarter of 2013 due to the standby and early termination revenues discussed above.
The Company's barge rigs continued to show strong operating conditions in the fourth quarter of 2013. Dayrates improved in the period when compared to the prior year by US$3,160 per day, and the third quarter of 2013 by US$750 per day. Utilization dropped slightly in the fourth quarter of 2013 but increased when compared to the prior year. Lower activity in the current period was mainly due to reduced utilization on one of the barge rigs operating under the Bareboat agreement during the fourth quarter. Overall, strong performance in this division shows the continued demand for Trinidad's expertise in barge drilling.
Full Year 2013
Trinidad's US and international segment generated operating income in 2013 that was largely in line with the previous year, despite lower operating days year over year. The impact of lower activity in 2013 was offset by early termination and standby revenue and an improved contribution from Trinidad's barge drilling rigs.
US and international operations generated revenue of $492.6 million in 2013, down 1.4% from $499.6 million in 2012. Revenue decreased slightly year over year as a result of lower activity levels partially offset by higher dayrates in 2013.
In 2013, total operating days and utilization for the US and international operation's land drilling rigs lowered compared to the prior year by 2,144 days and ten percentage points, respectively. Strong competition and growing demand for more efficient equipment impacted activity levels during the current year. In addition, Trinidad's decision to move three existing US rigs to its joint venture operations meant these rigs were removed from its marketed fleet for most of the second half of 2013 but remained in the utilization calculation. These rigs received standby revenue and remained in the rig count at the end of 2013. They were transferred to the joint venture in the first quarter of 2014.
As well, the three rigs Trinidad has in Mexico completed their contracts at the end of the second quarter of 2013 and were idle during most of the second half of 2013, negatively impacting utilization and revenue generation in the current year. Trinidad is currently pursuing future opportunities for these rigs and expects these assets to return to work in 2014.
As at December 31, 2013, four rigs were removed from Trinidad's active rig count due to these rigs being unmarketable in the current drilling environment. Each of these rigs contributed no operating days for the year ended December 31, 2013.
Dayrates in the US and international operations increased by US$1,096 per day in 2013 compared to the prior year. Higher dayrates were driven by early termination and standby revenues which increased in 2013 by US$1,411 per day compared to 2012. In 2013, a significant portion of the standby revenue related to three existing US rigs being upgraded and sold to the joint venture. In the fourth quarter of 2013, Trinidad received early termination revenue of US$19.6 million mainly relating to five US rigs with terms extending into 2014 and 2015. These rigs are all modern, high performance rigs that remain in high demand. Excluding the impact of early termination and standby revenue, dayrates in the US and international segment decreased by US$315 per day year over year as a result of increased competition in the US market.
Operating income - net percentage improved year over year to 41.1% from 40.5% in 2012. The increase was due to the early termination and standby revenues discussed above as this revenue has no associated operating costs.
Trinidad's barge drilling operations performed well year over year showing an increase in the dayrate of US$2,993 per day. As well, operating days and utilization showed improvement increasing on a year-to-date basis by 148 days and eight percentage points, respectively. Strong operations during the year reflect the solid demand and limited supply of high quality equipment such as Trinidad's in this sector.
FINANCIAL HIGHLIGHTS - QUARTERLY ANALYSIS
2013 | 2012 | ||||||||
($ millions except per share data and operating data) | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
Revenue | 224.6 | 208.7 | 165.4 | 247.2 | 209.6 | 215.1 | 174.3 | 260.4 | |
Operating income (1) | 99.6 | 76.2 | 55.7 | 98.4 | 77.8 | 80.6 | 66.4 | 104.4 | |
Operating income percentage (1) | 44.4% | 36.5% | 33.6% | 39.8% | 37.1% | 37.5% | 38.1% | 40.1% | |
Operating income - net percentage (1) | 47.0% | 38.5% | 35.6% | 43.3% | 39.7% | 40.0% | 40.0% | 43.5% | |
Net earnings (loss) for the year | 28.8 | 9.2 | 0.3 | 32.7 | (12.4) | 20.0 | 12.9 | 34.5 | |
Adjustments for: | |||||||||
Depreciation and amortization | 29.5 | 30.1 | 27.6 | 29.9 | 29.2 | 30.4 | 25.8 | 28.1 | |
Foreign exchange | 0.9 | 0.4 | - | - | (1.4) | 0.8 | (0.7) | 0.5 | |
Loss (gain) on sale of property and equipment | 0.1 | (0.1) | 1.3 | - | (11.5) | - | (0.5) | 0.2 | |
Impairment of property and equipment | - | - | 0.1 | - | 70.1 | 1.3 | - | 7.5 | |
Loss from investment in Joint Venture | 0.8 | - | - | - | - | - | - | - | |
Finance costs | 12.0 | 10.4 | 10.0 | 10.0 | 10.1 | 10.3 | 10.5 | 10.8 | |
Income taxes | 11.1 | 5.9 | (1.6) | 9.4 | (22.2) | 2.7 | 4.4 | 10.2 | |
Interest Income | (0.1) | - | - | - | - | - | - | - | |
Other | 1.5 | 5.9 | 2.2 | 2.80 | 1.4 | 2.9 | 1.0 | 0.1 | |
Income taxes paid | (1.8) | - | (0.8) | (1.3) | (2.0) | (1.1) | (0.7) | (0.7) | |
Income taxes recovered | 1.5 | 0.4 | 0.7 | - | 0.7 | 3.9 | - | - | |
Interest paid | (1.1) | (18.4) | (0.7) | (18.6) | (1.1) | (19.5) | (1.5) | (19.8) | |
Interest received | 0.1 | - | - | - | - | - | - | - | |
Funds provided by operations (1) | 83.3 | 43.8 | 39.1 | 64.9 | 60.9 | 51.7 | 51.2 | 71.4 | |
Net earnings (loss) per share (diluted) | 0.23 | 0.08 | 0.00 | 0.27 | (0.10) | 0.17 | 0.11 | 0.29 | |
Funds provided by operations per share (diluted) | 0.67 | 0.36 | 0.32 | 0.54 | 0.50 | 0.43 | 0.42 | 0.59 |
(1) | See the Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section of this document for further details. |
NON-GAAP MEASURES HIGHLIGHTS - QUARTERLY ANALYSIS
2013 | 2012 | ||||||||
($ thousands except per share data and operating data) | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
EBITDA (1) | 81,246 | 55,635 | 36,326 | 82,014 | 4,825 | 63,398 | 53,572 | 83,551 | |
Per share (diluted) (2) | 0.65 | 0.46 | 0.30 | 0.68 | 0.04 | 0.52 | 0.44 | 0.69 | |
Adjusted EBITDA (1) | 83,830 | 61,838 | 39,941 | 84,836 | 63,332 | 68,387 | 53,344 | 91,951 | |
Per share (diluted) (2) | 0.68 | 0.51 | 0.33 | 0.70 | 0.52 | 0.57 | 0.44 | 0.76 | |
Adjusted net earnings (1) | 31,221 | 15,449 | 2,631 | 35,534 | 57,807 | 24,913 | 13,129 | 42,698 | |
Per share (diluted) (2) | 0.25 | 0.13 | 0.02 | 0.29 | 0.48 | 0.21 | 0.11 | 0.35 |
(1) | See the Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section of this document for further details. |
(2) | Diluted shares include the weighted average number of shares outstanding over the period and the dilutive impact, if any, of the number of shares issuable pursuant to the Incentive Option Plan. |
OPERATING HIGHLIGHTS - QUARTERLY ANALYSIS
2013 | 2012 | |||||||||
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||
Land Drilling Market | ||||||||||
Operating days (1) | ||||||||||
Canada | 2,935 | 3,018 | 1,434 | 4,198 | 2,915 | 3,233 | 1,288 | 4,107 | ||
United States and International | 4,470 | 4,733 | 4,578 | 4,453 | 4,789 | 5,038 | 5,289 | 5,262 | ||
Rate per operating day (1) | ||||||||||
Canada (CDN$) | 25,102 | 23,686 | 25,511 | 25,401 | 26,190 | 23,501 | 25,343 | 24,206 | ||
United States and International (CDN$) | 27,243 | 23,297 | 22,908 | 22,416 | 22,305 | 22,518 | 22,586 | 21,935 | ||
United States and International (US$) | 26,213 | 22,460 | 22,436 | 22,487 | 22,589 | 22,263 | 22,616 | 21,698 | ||
Utilization rate - operating day (1) | ||||||||||
Canada | 52% | 54% | 26% | 79% | 56% | 62% | 26% | 84% | ||
United States and International | 71% | 76% | 73% | 72% | 77% | 81% | 86% | 90% | ||
Number of drilling rigs at period end | ||||||||||
Canada | 61 | 61 | 60 | 60 | 59 | 57 | 55 | 54 | ||
United States and International | 64 | 68 | 68 | 68 | 68 | 68 | 68 | 66 | ||
Coring and surface casing rigs | - | - | 15 | 15 | 15 | 20 | 20 | 20 | ||
Barge Drilling Market | ||||||||||
Operating days (1) | 394 | 449 | 445 | 415 | 386 | 376 | 429 | 364 | ||
Rate per operating day (CDN$) (1) | 34,810 | 33,962 | 31,731 | 29,097 | 29,954 | 30,008 | 29,072 | 25,448 | ||
Rate per operating day (US$) (1) | 33,490 | 32,740 | 31,077 | 29,158 | 30,330 | 29,583 | 29,106 | 25,204 | ||
Utilization rate - operating day (1) | 86% | 97% | 98% | 92% | 84% | 82% | 94% | 80% | ||
Number of barge drilling rigs at period end | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | ||
Number of barge drilling rigs under | ||||||||||
Bareboat Charter at period end | 3 | 3 | 3 | 3 | 3 | 3 | 3 | 3 |
(1) | See Non-GAAP Measures Definition and Additional GAAP Measures Definition section of this document for further details |
FINANCIAL SUMMARY
Trinidad's total long-term debt balance declined by $41.2 million during the current year when compared to December 31, 2012. The reduction in debt was due to a decrease in the revolving debt balances in the current year which was partially lowered by an increase in the foreign exchange impact on Senior Notes at year end.
Trinidad's revolving debt facilities decreased by $69.9 million as a result of payments made during the year. As of December 31, 2013, Trinidad had no amounts outstanding on either of the Canadian revolving credit facility or on the US revolving credit facility, leaving $200.0 million and US$100.0 million unutilized in these facilities, respectively. By comparison, as of December 31, 2012, Trinidad had $50.0 million outstanding on the Canadian facility and US$20.0 million outstanding on the US revolving facility. This decline in debt is in line with the Company's core objective of sustainable growth, in conjunction with leverage reduction.
A total of $90.3 million of capital expenditures were spent during the year ended December 31, 2013, compared to $185.7 million for the same period in the prior year. Capital expenditures were substantially related to the Company's rig build program as the Company delivered two new rigs into service in the Canadian operations, one in each of the first and third quarters of 2013. During the year, Trinidad also began construction on a new LNG-related rig with expected delivery in 2014. In addition, Trinidad worked on upgrading three existing rigs in the US drilling division to be sold to the joint venture for operations in Saudi Arabia. Lastly, the Company continued to work on upgrading existing equipment including moving systems, top drives and mud systems, to ensure these rigs remain competitive in the current market.
In 2014, Trinidad expects to spend approximately $315.0 million on capital projects including the following:
- Completion of one new rig to be delivered to Trinidad's Canadian operations for LNG-related drilling;
- Completion of one new rig and the upgrading of three existing rigs to be delivered to Saudi Arabia for the joint venture arrangement;
- Construction of four new rigs to be delivered to Mexico for the joint venture arrangement in late 2014 or early 2015;
- Upgrades to improve the efficiency and marketability of more than 30 existing rigs; and
- Maintenance and infrastructure capital.
OUTLOOK
Over the past few years, oil and gas companies have recognized the benefits of Trinidad's high performance equipment and are increasingly demanding this style of equipment. As the industry adapts to meet these demands, Trinidad needs to stay competitive and continuously upgrade its rigs. In 2014, Trinidad will focus on upgrading existing rigs in the four to eight year old range. While these rigs perform well and are relatively modern, their efficiency and marketability can be improved by upgrading specific aspects on these rigs, often with customer financial or contractual support.
Trinidad will also be working on its international joint venture in 2014 and beyond. Partnering with an experienced, global oilfield services provider gives the Company a new avenue for growth and allows it to expand internationally more quickly than it could have alone. This arrangement also lowers the risk for Trinidad, allowing the Company to reduce its capital exposure and take advantage of the partner's existing infrastructure and extensive experience. Trinidad has currently agreed to supply eight rigs to the joint venture in 2014 or early 2015, including five new builds.
In addition to Trinidad's international opportunities, it also has compelling growth potential in its own back yard. As Canadian LNG development becomes more certain and the projects pass their regulatory hurdles, Trinidad expects that LNG-related activity will continue to ramp up. Trinidad has the right experience and style of equipment for this drilling and currently works for most of the key players in LNG development, positioning it well to benefit from this increased demand.
Trinidad has a large number of opportunities to choose from in 2014 and the financial flexibility to fund its growth. The Company's existing business generates strong cash flow and its flexible financial position provides it with a solid base to grow from. Trinidad expects industry conditions in 2014 to be similar or slightly better than 2013, with potential growth in Canada driven largely by LNG development and in the US by an ongoing move to high performance equipment. Activity levels and dayrates in the US market have begun to improve in the first few months of 2014. If these conditions continue to improve, it would have positive implications for the Company's 2014 results. In addition to these industry improvements, Trinidad expects to see an increasing contribution from its international joint venture as the number of rigs operating under this arrangement increases.
The longer-term outlook for Trinidad looks positive. The Company has a variety of opportunities ahead of it, both through its joint venture and independently. This future expansion and the Company's ongoing commitment to maintaining a flexible capital structure is expected to allow Trinidad to broaden its operations and expand its revenue base while also reducing risk for its shareholders.
CONFERENCE CALL
A conference call and webcast to discuss the results will be held for the investment community on Thursday March 6th, 2014 beginning at 9:00 a.m. MT (11:00 a.m. ET). To participate, please dial (888) 231-8191 (toll-free in North America) or (647) 427-7450 approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 12:30 p.m. MT on March 6th, 2014 until midnight March 13th, 2014 by dialing (855) 859 2056 or (416) 849-0833 and entering replay access code 33171815.
A live audio webcast of the conference call will also be available via the Investor Relations page of Trinidad's website.
Trinidad is a corporation focused on sustainable growth that trades on the Toronto Stock Exchange under the symbol TDG. Trinidad's divisions operate in the drilling and barge-drilling sectors of the North American oil and natural gas industry with operations in Canada, the United States and Mexico. In addition, through a joint venture, Trinidad has the opportunity to operate drilling rigs in other international markets such as Saudi Arabia. Trinidad is focused on providing modern, reliable, expertly designed equipment operated by well-trained and experienced personnel. Trinidad's drilling fleet is one of the most adaptable, technologically advanced and competitive in the industry.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||
As at | December 31, | December 31, |
($ thousands) | 2013 | 2012 |
Assets | ||
Current Assets | ||
Cash and cash equivalents | 268,160 | 4,933 |
Accounts receivable | 166,557 | 182,071 |
Inventory | 8,474 | 8,600 |
Prepaid expenses | 5,557 | 4,808 |
Assets held for sale | 3,685 | 816 |
452,433 | 201,228 | |
Property and equipment | 1,275,465 | 1,253,921 |
Intangible assets and goodwill | 91,729 | 86,145 |
Investment in joint venture | 7,869 | - |
1,827,496 | 1,541,294 | |
Liabilities | ||
Current Liabilities | ||
Accounts payable and accrued liabilities | 110,455 | 82,265 |
Dividends payable | 6,906 | 6,043 |
Deferred revenue and customer deposits | 31,952 | 2,891 |
Current portion of long-term debt | - | 617 |
149,313 | 91,816 | |
Long-term debt | 468,670 | 509,215 |
Deferred income taxes | 95,425 | 76,414 |
713,408 | 677,445 | |
Shareholders' Equity | ||
Common shares | 1,117,197 | 952,043 |
Contributed surplus | 50,607 | 50,245 |
Accumulated other comprehensive income (loss) | 4,404 | (34,403) |
Deficit | (58,120) | (104,036) |
1,114,088 | 863,849 | |
1,827,496 | 1,541,294 |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||
Three months ended December 31, | For the years ended December 31, | |||
($ thousands) | 2013 | 2012 | 2013 | 2012 |
Revenue | ||||
Oilfield service revenue | 223,151 | 209,429 | 844,342 | 859,133 |
Other revenue | 1,412 | 128 | 1,546 | 194 |
224,563 | 209,557 | 845,888 | 859,327 | |
Expenses | ||||
Operating expense | 124,956 | 131,798 | 516,081 | 530,176 |
General and administrative | 16,587 | 15,903 | 71,004 | 57,545 |
Depreciation and amortization | 29,512 | 29,144 | 117,067 | 113,527 |
Foreign exchange | 959 | (1,468) | 1,342 | (753) |
Loss (gain) on sale of property and equipment | 53 | (11,546) | 1,341 | (11,841) |
Impairment of property and equipment | - | 70,044 | 131 | 78,853 |
172,067 | 233,875 | 706,966 | 767,507 | |
Loss from investment in joint venture | 762 | - | 768 | - |
Finance costs | 11,975 | 10,076 | 42,368 | 41,662 |
Earnings before income taxes | 39,759 | (34,394) | 95,786 | 50,158 |
Income taxes | ||||
Current | (889) | 1,216 | 1,077 | 1,282 |
Deferred | 11,958 | (23,364) | 23,757 | (6,162) |
11,069 | (22,148) | 24,834 | (4,880) | |
Net earnings | 28,690 | (12,246) | 70,952 | 55,038 |
Other comprehensive income | ||||
Foreign currency translation adjustment, | ||||
net of income tax | 18,276 | 2,714 | 38,807 | (9,026) |
18,276 | 2,714 | 38,807 | (9,026) | |
Total comprehensive income | 46,966 | (9,532) | 109,759 | 46,012 |
Earnings per share | ||||
Net earnings | ||||
Basic / Diluted | 0.23 | (0.10) | 0.58 | 0.46 |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | |||||
For the years ended December 31, 2013 and 2012 | |||||
($ thousands) | Common shares |
Contribued surplus |
Accumulated other comprehensive income (loss) (1) |
(Deficit) | Total equity |
Balance at December 31, 2012 | 952,043 | 50,245 | (34,403) | (104,036) | 863,849 |
Exercise of stock options | 142 | (32) | - | - | 110 |
Share-based payments expense | - | 394 | - | - | 394 |
Total comprehensive income | - | - | 38,807 | 70,952 | 109,759 |
Dividends | - | - | - | (25,036) | (25,036) |
Share issuance proceeds | 172,500 | - | - | - | 172,500 |
Share issuance costs | (7,488) | - | - | - | (7,488) |
Balance at December 31, 2013 | 1,117,197 | 50,607 | 4,404 | (58,120) | 1,114,088 |
Balance at December 31, 2011 | 952,043 | 49,462 | (25,377) | (134,902) | 841,226 |
Share-based payments expense | - | 783 | - | - | 783 |
Total comprehensive income (loss) | - | - | (9,026) | 55,038 | 46,012 |
Dividends | - | - | - | (24,172) | (24,172) |
Balance at December 31, 2012 | 952,043 | 50,245 | (34,403) | (104,036) | 863,84 |
(1) Accumulated other comprehensive income (loss) consisted of the foreign currency translation adjustment.
All amounts will be reclassified to profit or loss when specific conditions are met.
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
For the years ended December 31, | |||
($ thousands) | 2013 | 2012 | |
Cash provided by (used in) | |||
Operating activities | |||
Net earnings | 70,952 | 55,038 | |
Adjustments for: | |||
Depreciation and amortization | 117,067 | 113,527 | |
Foreign exchange | 1,342 | (753) | |
Loss (gain) on sale of property and equipment | 1,341 | (11,841) | |
Impairment of property and equipment | 131 | 78,853 | |
Loss from investment in joint venture | 768 | - | |
Finance costs | 42,368 | 41,662 | |
Income taxes | 24,834 | (4,880) | |
Interest income | (100) | (11) | |
Other (1) | 12,410 | 5,409 | |
Income taxes paid | (3,873) | (4,491) | |
Income taxes recovered | 2,556 | 4,640 | |
Interest paid | (38,761) | (41,924) | |
Interest received | 100 | 11 | |
Funds provided by operations | 231,135 | 235,240 | |
Change in non-cash operating working capital | 67,878 | 23,765 | |
Cash provided by operations | 299,013 | 259,005 | |
Investing activities | |||
Purchase of property and equipment | (90,260) | (185,718) | |
Proceeds from disposition of property and equipment | 13,467 | 22,519 | |
Investment in joint venture | (8,529) | - | |
Change in non-cash working capital | (18,467) | 690 | |
Cash used by investing | (103,789) | (162,509) | |
Financing activities | |||
Proceeds from long-term debt | 39,257 | 170,555 | |
Repayments of long-term debt | (115,241) | (233,259) | |
Proceeds from exercise of options | 110 | - | |
Dividends paid | (24,172) | (24,172) | |
Gross proceeds from share issuance | 172,500 | - | |
Share issuance costs | (7,488) | - | |
Finance costs | (459) | (373) | |
Cash provided (used) by financing | 64,507 | (87,249) | |
Cash flow from operating, investing and financing activities | 259,731 | 9,247 | |
Effect of translation of foreign currency cash | 3,496 | 286 | |
Increase in cash for the year | 263,227 | 9,533 | |
Cash and cash equivalents (bank indebtedness) - beginning of year | 4,933 | (4,600) | |
Cash and cash equivalents - end of year | 268,160 | 4,933 | |
(1) | Other includes share-based payment expense. |
SEGMENTED INFORMATION | |||||||
For three months ended | United States / | ||||||
December 31, 2013 | Canadian | International | Intersegment | ||||
($ thousands) | Operations | Operations | Eliminations | Corporate | Total | ||
Operating revenue | 73,856 | 135,520 | - | - | 209,376 | ||
Other revenue | 64 | 521 | - | - | 585 | ||
Third party recovery | 8,480 | 5,295 | - | - | 13,775 | ||
General and administrative - third party recovery | - | - | - | 827 | 827 | ||
Inter-segment revenue | (507) | - | 507 | - | - | ||
81,893 | 141,336 | 507 | 827 | 224,563 | |||
Operating | 40,616 | 70,565 | - | - | 111,181 | ||
Third party costs | 8,480 | 5,295 | - | - | 13,775 | ||
Inter-segment operating | (507) | - | 507 | - | - | ||
Operating income | 33,304 | 65,476 | - | 827 | 99,607 | ||
Depreciation and amortization | 11,060 | 18,452 | - | - | 29,512 | ||
Loss (gain) on sale of assets | 102 | (49) | - | - | 53 | ||
Impairment of capital assets | - | - | - | - | - | ||
11,162 | 18,403 | - | - | 29,565 | |||
Segmented income (loss) | 22,142 | 47,073 | - | 827 | 70,042 | ||
Joint venture (gain) loss | - | 762 | - | - | 762 | ||
General and administrative | - | - | - | 15,760 | 15,760 | ||
General and administrative - third party costs | - | - | - | 827 | 827 | ||
Foreign exchange | - | - | - | 959 | 959 | ||
Finance costs | - | - | - | 11,975 | 11,975 | ||
Income taxes | - | - | - | 11,069 | 11,069 | ||
Net earnings (loss) | 22,142 | 46,311 | - | (39,763) | 28,690 | ||
As at | |||||||
Purchase of property and equipment | 5,014 | 34,897 | - | 39,911 | |||
For three months ended | United States / | ||||||
December 31, 2012 | Canadian | International | Intersegment | ||||
($ thousands) | Operations | Operations | Eliminations | Corporate | Total | ||
Operating revenue | 77,577 | 118,398 | - | - | 195,975 | ||
Other revenue | 120 | 8 | - | - | 128 | ||
Third party recovery | 9,840 | 3,614 | - | - | 13,454 | ||
General and administrative - third party recovery | - | - | - | - | - | ||
Inter-segment revenue | 124 | - | (124) | - | - | ||
87,661 | 122,020 | (124) | - | 209,557 | |||
Operating | 47,308 | 71,037 | - | - | 118,345 | ||
Third party costs | 9,840 | 3,614 | - | - | 13,454 | ||
Inter-segment operating | 124 | - | (124) | - | - | ||
Operating income | 30,389 | 47,369 | - | - | 77,758 | ||
Depreciation and amortization | 9,645 | 19,499 | - | - | 29,144 | ||
Loss (gain) on sale of assets | (11,284) | (262) | - | - | (11,546) | ||
Impairment of capital assets | 6,811 | 63,233 | - | - | 70,044 | ||
5,172 | 82,470 | - | - | 87,642 | |||
Segmented income (loss) | 25,217 | (35,101) | - | - | (9,884) | ||
Joint venture (gain) loss | - | - | - | - | - | ||
General and administrative | - | - | - | 15,903 | 15,903 | ||
General and administrative - third party costs | - | - | - | - | - | ||
Foreign exchange | - | - | - | (1,468) | (1,468) | ||
Finance costs | - | - | - | 10,076 | 10,076 | ||
Income taxes | - | - | - | (22,149) | (22,149) | ||
Net earnings (loss) | 25,217 | (35,101) | - | (2,362) | (12,246) | ||
As at | |||||||
Purchase of property and equipment | 30,622 | 5,982 | - | - | 36,604 |
For the year ended | United States / | ||||||
December 31, 2013 | Canadian | International | Intersegment | ||||
($ thousands) | Operations | Operations | Eliminations | Corporate | Total | ||
Operating revenue | 298,510 | 492,022 | - | - | 790,532 | ||
Other revenue | 125 | 594 | - | - | 719 | ||
Third party recovery | 32,246 | 21,564 | - | - | 53,810 | ||
General and administrative - third party recovery | - | - | - | 827 | 827 | ||
Inter-segment revenue | 2,612 | - | (2,612) | - | - | ||
333,493 | 514,180 | (2,612) | 827 | 845,888 | |||
Operating | 172,223 | 290,048 | - | - | 462,271 | ||
Third party costs | 32,246 | 21,564 | - | - | 53,810 | ||
Inter-segment operating | 2,612 | - | (2,612) | - | - | ||
Operating income | 126,412 | 202,568 | - | 827 | 329,807 | ||
Depreciation and amortization | 41,154 | 75,913 | - | - | 117,067 | ||
Loss (gain) on sale of assets | 405 | 936 | - | - | 1,341 | ||
Impairment of capital assets | 131 | - | - | - | 131 | ||
41,690 | 76,849 | - | - | 118,539 | |||
Segmented income (loss) | 84,722 | 125,719 | - | 827 | 211,268 | ||
Joint venture (gain) loss | - | 768 | - | - | 768 | ||
General and administrative | - | - | - | 70,177 | 70,177 | ||
General and administrative - third party costs | - | - | - | 827 | 827 | ||
Foreign exchange | - | - | - | 1,342 | 1,342 | ||
Finance costs | - | - | - | 42,368 | 42,368 | ||
Income taxes | - | - | - | 24,834 | 24,834 | ||
Net earnings (loss) | 84,722 | 124,951 | - | (138,721) | 70,952 | ||
Purchase of property and equipment | 40,216 | 50,044 | - | - | 90,260 | ||
For the year ended | United States / | ||||||
December 31, 2012 | Canadian | International | Intersegment | ||||
($ thousands) | Operations | Operations | Eliminations | Corporate | Total | ||
Operating revenue | 303,500 | 499,852 | - | - | 803,352 | ||
Other revenue | 414 | (220) | - | - | 194 | ||
Third party recovery | 37,539 | 18,242 | - | - | 55,781 | ||
General and administrative - third party recovery | - | - | - | - | - | ||
Inter-segment revenue | 9,622 | - | (9,622) | - | - | ||
351,075 | 517,874 | (9,622) | - | 859,327 | |||
Operating | 177,111 | 297,284 | - | - | 474,395 | ||
Third party costs | 37,539 | 18,242 | - | - | 55,781 | ||
Inter-segment operating | 9,622 | - | (9,622) | - | - | ||
Operating income | 126,803 | 202,348 | - | - | 329,151 | ||
Depreciation and amortization | 35,017 | 78,510 | - | - | 113,527 | ||
Loss (gain) on sale of assets | (11,060) | (781) | - | - | (11,841) | ||
Impairment of capital assets | 14,058 | 64,795 | - | - | 78,853 | ||
38,015 | 142,524 | - | - | 180,539 | |||
Segmented income (loss) | 88,788 | 59,824 | - | - | 148,612 | ||
Joint venture (gain) loss | - | - | - | - | - | ||
General and administrative | - | - | - | 57,545 | 57,545 | ||
General and administrative - third party costs | - | - | - | - | - | ||
Foreign exchange | - | - | - | (753) | (753) | ||
Finance costs | - | - | - | 41,662 | 41,662 | ||
Income taxes | - | - | - | (4,880) | (4,880) | ||
Net earnings (loss) | 88,788 | 59,824 | - | (93,574) | 55,038 | ||
Purchase of property and equipment | 119,005 | 66,713 | - | - | 185,718 |
ADVISORY
NON-GAAP MEASURES DEFINITIONS
This document contains references to certain financial measures and associated per share data that do not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. These financial measures are computed on a consistent basis for each reporting period and include EBITDA, EBITDA from investment in joint venture, Adjusted EBITDA, Adjusted net earnings, working capital, Senior Debt to Bank EBITDA, Total Debt to Bank EBITDA, Bank EBITDA to Cash Interest Expense, drilling days, operating days, utilization rate - drilling day, utilization rate - operating day, and rate per operating day. These non-GAAP measures are identified and defined as follows:
"EBITDA" is a measure of the Company's operating profitability. EBITDA provides an indication of the results generated by the Company's principal business activities prior to how these activities are financed, assets are depreciated and amortized or how the results are taxed in various jurisdictions.
"EBITDA from investment in joint venture" provides an indication of the results generated by the Company's joint venture operations prior to how these activities are financed, assets are depreciated and amortized or how the results are taxed in various jurisdictions.
"Adjusted EBITDA" is used by management and investors to analyze EBITDA (as defined above) prior to the effect of foreign exchange, share-based payment expense, impairment expenses and the sale of assets. Adjusted EBITDA also takes into account the Company's portion of the principal activities of the joint venture arrangement by removing the loss (gain) from investment in joint venture and including EBITDA from investment in joint venture. Adjusted EBITDA is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted EBITDA provides an indication of the results generated by the Company's principal business activities prior to how these activities are financed, assets are depreciated, amortized and impaired, the impact of foreign exchange, how the results are taxed in various jurisdictions and effects of share-based payment expenses.
"Adjusted net earnings" is used by management and the investment community to analyze net earnings prior to the effect of foreign exchange, share-based payment expense and impairment charges and is not intended to represent net earnings as calculated in accordance with IFRS. Adjusted net earnings is a useful measure because it provides an indication of results of the Company's principal business activities before consideration of fluctuations in foreign exchange gains and losses, impairment and share-based payment expenses, which are not consistently incurred period over period.
"Working capital" is used by management and the investment community to analyze the operating liquidity available to the Company.
"Senior Debt to Bank EBITDA" is defined as the consolidated balance of the revolving facility and other debt secured by a lien at quarter end to consolidated Bank EBITDA for the trailing 12 months (TTM). Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange.
"Total Debt to Bank EBITDA" is defined as the consolidated balance of long-term debt, which includes the Senior Debt, Senior Notes Payable and dividends payable at quarter end, to consolidated Bank EBITDA for the TTM. Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange.
"Bank EBITDA to Cash Interest Expense" is defined as the consolidated Bank EBITDA for TTM to the cash interest expense on all debt balances for TTM. Bank EBITDA used in this financial ratio is calculated as EBITDA plus impairment expense, loss (gain) on sale of property and equipment, loss (gain) from investment in joint venture, share-based payment expense and unrealized foreign exchange.
"Drilling days" is defined as rig days between spud to rig release.
"Operating days" is defined as moving days (move in, rig up and tear out) plus drilling days (spud to rig release).
"Utilization rate - drilling day" is defined as drilling days divided by total available rig days.
"Utilization rate - operating day" is defined as operating days (drilling days plus moving days) divided by total available rig days.
"Rate per operating day" or "dayrate" is defined as operating revenue (net of third party costs) divided by operating days (drilling days plus moving days).
ADDITIONAL GAAP MEASURES DEFINITIONS
The Company uses certain additional GAAP financial measures within the financial statements and document that are not defined terms under IFRS to assess performance. Management believes that these measures provide useful supplemental information to investors. These financial measures are computed on a consistent basis for each reporting period and include Funds provided by operations, Operating income, Operating income percentage and Operating income - net percentage. These additional GAAP measures are identified and defined as follows:
"Funds provided by operations" is used by management and investors to analyze the funds generated by Trinidad's principal business activities prior to consideration of working capital, which is primarily made up of highly liquid balances. This balance is reported in the Consolidated Statements of Cash Flows included in the cash provided by operating activities section.
"Operating income" is used by management and investors to analyze overall and segmented operating performance. Operating income is not intended to represent an alternative to net earnings or other measures of financial performance calculated in accordance with IFRS. Operating income is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information contained in the notes to the consolidated financial statements. Operating income is defined as revenue less operating expenses.
"Operating income percentage" is used by management and investors to analyze overall and segmented operating performance, including third party recovery and third party costs, as well as inter-segment revenue and inter-segment operating costs. Operating income percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information in the notes to the consolidated financial statements. Operating income percentage is defined as operating income divided by revenue.
"Operating income - net percentage" is used by management and investors to analyze overall and segmented operating performance excluding third party recovery and third party costs, as well as inter-segment revenue and inter-segment operating costs, as these revenues and expenses do not have an effect on consolidated net earnings. Operating income - net percentage is calculated from the consolidated statements of operations and comprehensive income (loss) and from the segmented information in the notes to the consolidated financial statements. Operating income - net percentage is defined as operating income less third party G&A expenses divided by revenue net of operating and G&A third party costs.
Trinidad is a corporation focused on sustainable growth that trades on the Toronto Stock Exchange under the symbol TDG. Trinidad's divisions operate in the drilling and barge-drilling sectors of the North American oil and natural gas industry with operations in Canada, the United States and Mexico. Additionally, up until June 30, 2013, Trinidad's operations included coring rigs which have subsequently been sold. In addition, through a joint venture agreement signed in the current period, Trinidad has the opportunity to operate drilling rigs in other international markets such as Saudi Arabia. Trinidad is focused on providing modern, reliable, expertly designed equipment operated by well-trained and experienced personnel. Trinidad's drilling fleet is one of the most adaptable, technologically advanced and competitive in the industry.
FORWARD-LOOKING STATEMENTS
This document contains certain forward-looking statements relating to Trinidad's plans, strategies, objectives, expectations and intentions. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "confident", "might" and similar expressions are intended to identify forward-looking information or statements. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this document. The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements. In particular, but without limiting the foregoing, this document may contain forward-looking information and statements pertaining to the completion of announced rig construction programs on a timely basis and economical terms; the assumption that Trinidad's customers will honour their take-or-pay contracts; fluctuations in the demand for Trinidad's services; the ability for Trinidad to attract and retain qualified personnel, in particular field staff to crew the Company's rigs; the existence of competitors, technological changes and developments in the oilfield services industry; the existence of operating risks inherent in the oilfield services industry; assumptions respecting capital expenditure programs and other expenditures by oil and gas exploration and production companies; assumptions regarding commodity prices, in particular oil and natural gas; assumptions respecting supply and demand for commodities, in particular oil and natural gas; assumptions regarding foreign currency exchange rates and interest rates; the existence of regulatory and legislative uncertainties; the possibility of changes in tax laws; and general economic conditions including the capital and credit markets; assumptions made about future performance and operations of the joint venture arrangement. Trinidad cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information and statements contained in this document speak only as of the date of this document and Trinidad assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.
SOURCE: Trinidad Drilling Ltd.
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Lyle Whitmarsh,
Chief Executive Officer
Brent Conway,
President
Lisa Ottmann
Vice President, Investor Relations
(403) 294-4401
email: [email protected]
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