Source: Xtreme Drilling Corp.

Xtreme Drilling Corp. Announces Fourth Quarter 2017 Financial and Operating Results

CALGARY, Alberta, March 08, 2018 (GLOBE NEWSWIRE) -- Xtreme Drilling Corp. (TSX:XDC) (“Xtreme” or the “Company”) announces its fourth quarter 2017 financial and operating results. It is anticipated that filing will take place on SEDAR of Consolidated Financial Statements as well as Management's Discussion and Analysis for the three and twelve months ended December 31, 2017, by March 9, 2018. All reported amounts are in Canadian dollars ("CAD"), unless otherwise noted.

The recent trend of strong utilization for Xtreme’s XDR 500 rig fleet continued in the fourth quarter of 2017. All nine of the available XDR 500 rigs worked during the quarter. Two of these rigs were released from well to well contracts in November and commenced operations with a new customer in January 2018 on one-year term contracts. Along with strong utilization in the fourth quarter, the average revenue per operating day increased by approximately 12 percent from the prior quarter. Xtreme increased contract backlog days to nearly 3,900 at the end of 2017 as compared to approximately 300 at the end of 2016. The current contract backlog represents approximately $77 million US dollars ("USD") in revenue.

In 2017 the Company re-activated four XDR 500 rigs which had been idled in prior years. As a reference point, the bottom of the US market was in the second quarter of 2016 when less than 375 drilling rigs were operating. During this period Xtreme’s activity decreased to four active XDR 500 rigs. Today approximately 965 drilling rigs are operating in the United States. The majority of rigs that have returned to work are the most efficient and technologically advanced. The increased requirement on efficiency and depth capacity will continue to reward drilling contractors with innovative technology and the highest quality fleets.

The development and build of the first generation of Xtreme’s Evolution Series 850XE rig represents a significant competitive leap forward for the Company. The 850XE was designed to meet all of the leading-edge requirements from US resource play operators. The goal of the initial design and engineering of the 850XE was to optimize the mechanization of the drilling rig, all while increasing drilling depth capability and pad efficiency. It is Xtreme’s belief that the 850XE represents the highest capacity and most technologically advanced rig in today’s US land market.

The first 850XE commenced operations in January 2018 on a two-year term contract. The second 850XE is currently in transit to the Utica play in Southwestern Ohio and the final 850 XE should begin mobilization to the same customer in Ohio by the end of March. The Company took more time than was initially estimated to commission the 850XE rigs in order to make certain that the cutting-edge technology and rig componentry were optimized. While the additional time had the effect of increasing overall project cost to near $19 million USD per rig, the end result is a rig with proprietary technology and limited rivals in today’s market. In addition, the 850 XE design gives Xtreme a very strong platform to meet the future demands of ever increasing well depths and operator requirements.

Upon completion of the final 850XE, Xtreme will have executed on the announced strategy of transforming the Company into a pure play, high specification US drilling contractor. The entire 12 rig marketed fleet will consist of tier 1 AC electric rigs with 1,500hp or greater capacity. As part of the strategic transition to a high spec drilling contractor, the Company continues to actively hold for sale four XDR 300 rigs. These are heavy single AC rigs with 600 hp draw works that have historically worked in Canada, Mexico, India and the United States.

Xtreme president and CEO Matt Porter commented on the progress, “Our transformation to a high spec US driller is nearing completion. We are excited to develop additional opportunities around our industry leading technology and 850XE rig design in 2018 and beyond. Our belief is the winners in the next cycle will be drilling contractors that can deliver the highest level of capacity, efficiency and technology to their customer. We believe Xtreme is well positioned to compete with anyone.”

Q4 2017 Highlights

  • Operating days for the quarter were 707, a decrease from 851in the third quarter. The decrease in operating days from the prior quarter was based on two XDR 500 rigs that released from well to well contracts earlier than anticipated in November. Both rigs were subsequently contracted to one-year term contracts and began operations in January of 2018. In addition, in the third quarter the Company had approximately 19 days related to rigs working in Canada. These rigs were sold on September 30, 2017. Utilization was 77 percent for the fourth quarter.
  • For the three months ended December 31, 2017, the Company reported revenue of $16.3 million as compared to $18.2 million in the previous quarter. Revenue per day increased to $23,088 in the fourth quarter from $21,354 in the third quarter of 2017.
  • Operating expenses include all direct and indirect costs associated with the operation, maintenance and support of the drilling operations. Direct costs are tied and to operating levels; however, indirect costs are often not affected by changes in operating days and utilization as they are more fixed in nature. For the three months ended December 31, 2017, operating expenses were $18,919 per operating day, an increase from $17,310 per operating day in the previous quarter. Operating expenses per operating day increased in the fourth quarter primarily due to an increase in personnel costs, a slight increase in repair and maintenance, along with a decrease in operating days.
  • General and Administrative expenses decreased from $2.4 million for the third quarter to $2.1 million for the fourth quarter of 2017. The decrease from the previous quarter is due to lower professional fees related to legal and infrastructure costs and lower administrative costs related to international offices. On a go forward basis, the Company expects the general and administrative expenses to be in the range of $2.2 to $2.4 million per quarter.
  • Adjusted EBITDA was $0.8 million for the fourth quarter, a slight decrease from what was reported in the third quarter of $1.0 million. This was primarily due to decrease in revenue and rig utilization.
  • The Company entered into an agreement with an equipment finance company to borrow $6 million USD- equivalent secured by one of the 850XE rigs. The loan has an implied interest rate of 12.46 percent and amortized over a 42-month period. There are no restrictive covenants associated with this debt. On February 27, 2018, the Company amended its agreement with a commercial lender to provide an additional amount of $3 million USD under the collateralized debt agreement. The loan was funded on March 1, 2018.
  • The Company’s USD revenue and expenses are impacted by the exchange rate between the US dollar and Canadian dollar. For the three months ended December 31, 2017, the average exchange rate used to convert the USD-denominated revenues and expenses to CAD was $1.27/$1 USD ($1.25 for the previous quarter).
  • Capital expenditures for the fourth quarter were $9.1 million, which included approximately $8.8 million related to the 850XE upgrade program. Through December 31, 2017, total capital expenditures amounted to $75.7 million. It is anticipated that the Company will have capital expenditures of $10.0 to $12.0 million in the first quarter, relating primarily to remaining costs for the 850XE rigs and associated ancillary equipment and drill pipe.

Selected Quarterly Financial Information from Continuing Operations

Three months endedDec 31, 2017 Sep 30, 2017 Jun 30, 2017 Mar 31, 2017 
Revenue16,323 18,172 15,141 12,379 
Adjusted EBITDA818 1,008 (1,630)(78)
Adjusted EBITDA as a percentage of revenue5%6 %(11)%(1)%
Net loss(9,564)(8,673)(48,366)(12,168)
Net loss per share - basic ($)(0.13)(0.12)(0.61)(0.14)
Operating cash flows from continuing operations(3,403)(3,096)(4,957)101 
Capital assets205,456 203,316 196,704 245,267 
Total assets251,573 253,171 272,798 348,083 
Net debt(2,389)(19,144)(41,682)(88,152)
Operating days707 851 683 583 
Utilization (percentage)77%93%75%36%
Weighted average number of rigs in service10 10 10 18 
Total number of available rigs, end of quarter10 10 10 18 
 Dec 31, 2016 Sep 30, 2016 Jun 30, 2016 Mar 31, 2016 
Revenue9,929 8,468 7,369 16,266 
Adjusted EBITDA(148)(1,423)(5,449)784 
Adjusted EBITDA as a percentage of revenue(1)%(17)%(74)%5%
Net loss(11,122)(29,542)(28,699)(7,350)
Net loss per share - basic ($)(0.13)(0.35)(0.34)(0.09)
Operating cash flows from continuing operations(1,032)(1,168)(10,849)(615)
Capital assets240,656 243,564 266,188 276,521 
Total assets366,762 373,104 409,794 316,270 
Net debt(113,882)(118,863)(110,794)90,242 
Operating days479 433 355 564 
Utilization (percentage)25%22%19%30%
Weighted average number of rigs in service21 21 21 21 
Total number of rigs, end of quarter21 21 21 21 

Conference Call Details

Xtreme has scheduled a conference call to discuss results with investors, analysts, and stakeholders on Friday, March 9, 2018, beginning promptly at 10:00 am MT (11:00 am CT, 12:00 am ET).

Matt Porter, President and Chief Executive Officer, will host the conference call.

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.

+1 844-889-6858 (North America Toll Free) or +1 661-378-9711 (International) Webcast:     Conference ID: 1087317
An audio replay of the call will be available until 4:00, March 14, 2018. To access the replay, call +1 (855) 859-2056 or +1 (404) 537-3406 and enter Conference ID 1087317.

Xtreme Drilling Corp.
Consolidated Statements of Financial Position
(in thousands of Canadian dollars)

 Dec 31, 2017 Dec 31, 2016 
Current assets  
Cash and cash equivalents15,450 113,829 
Accounts receivable12,081 6,716 
Other receivables1,782 1,830 
Inventory1,703 2,810 
Prepaid expenses1,140 921 
 32,156 126,106 
Tax recoverable789  
Assets held for sale13,172  
Property and equipment205,456 240,656 
Total Assets251,573 366,762 
Liabilities and Equity  
Current liabilities  
Accounts payable and accrued liabilities12,214 14,827 
Current tax payable219 6,464 
Secured borrowings4,419  
Current portion of finance leases118  
Current portion of long-term debt1,569  
 18,539 21,291 
Finance leases514  
Long-term debt5,755  
Total Liabilities24,808 21,291 

Shareholders’ equity
Share capital298,262 339,448 
Contributed surplus30,156 13,387 
Accumulated deficit(180,439)(101,670)
Foreign currency translation reserve78,786 94,306 
Total Shareholders’ Equity226,765 345,471 
Total Liabilities and Shareholders’ Equity251,573 366,762 

Xtreme Drilling Corp.
Consolidated Statements of Loss
For the year ended December 31, 2017 and 2016
(in thousands of Canadian dollars, except share and per share data)

 2017 2016 
Revenue (Note 19)62,015 42,032 
Operating expenses51,368 34,183 
General and administrative expenses10,528 18,596 
Depreciation expense27,488 44,920 
Impairment of property and equipment and assets held for sale30,195 11,895 
Stock-based compensation716 3,285 
Foreign exchange loss (gain)256 (1,171)
Loss on disposal of equipment and assets held for sale23,775 4,344 
Other income(74)(19)
Interest expense337 4,114 
Tax recovery

Current recovery






Total tax recovery(3,805)(1,402)

Net loss from continuing operations




Net income from discontinued operations, net of tax 55,874 
Net loss(78,769)(20,839)

Net loss per common share from continuing operations
– basic(0.99)(0.91)
– diluted(0.99)(0.91)
Net income per common share from discontinued operations  
– basic0.00 0.66 
– diluted0.00 0.66 
Net loss per common share  
– basic(0.99)(0.25)
– diluted(0.99)(0.25)
Weighted average number of common shares  
– basic79,173,515 84,115,077 
– diluted79,173,515 84,115,077 

Xtreme Drilling Corp.
Consolidated Statements of Comprehensive Loss

For the year ended December 31, 2017 and 2016
(in thousands of Canadian dollars)

 2017 2016 
Net loss(78,769)(20,839)
Other comprehensive loss    
Items that may be subsequently reclassified to profit or loss:    
Unrealized loss on translating financial statements of foreign operations(14,811)(8,765)
Currency translation adjustment on disposal of foreign operation(709) 
Comprehensive loss(94,289)(29,604)
Total comprehensive (loss) income arising from:  
Continuing operations(94,289)(76,420)
Discontinued operations 46,816 
Comprehensive loss(94,289)(29,604)

Xtreme Drilling Corp.
Consolidated Statements of Changes in Equity

For the year ended December 31, 2017 and 2016
(in thousands of Canadian dollars)

Balance at January 1, 2016333,515  15,478  (80,831 )103,071  371,233  
Other comprehensive loss:       
Currency translation differences -  -  -  (8,765 )(8,765)
Total comprehensive loss -  -  (20,839 )(8,765 )(29,604 )
Value of employee services -  3,769  -  -  3,769  
Transfer from share option 5,860  (5,860 )-  -  -  
Proceeds from shares issued 73  -  -  -  73  
Total transactions with owners 5,933  (2,091 )-  -  3,842  
Balance at December 31, 2016339,448  13,387  (101,670 )94,306  345,471  
Balance at January 1, 2017339,448 13,387 (101,670)94,306 345,471 
Net loss -  -  (78,769)-  (78,769)
Other comprehensive loss:       
Currency translation differences -  -  -  (15,520)(15,520)
Total comprehensive loss -  -  (78,769)(15,520)(94,289)
Employee share option scheme:       
Value of employee services -  716 -  -  716 
Transfer from share option 505 (505)-  -  - 
Proceeds from shares issued 112 - -  -  112 
Repurchase of shares (41,803)16,558 -  -  (25,245)
Total transactions with owners (41,186)16,769 -  -  (24,417)
Balance at December 31, 2017298,262 30,156 (180,439)78,786 226,765 

Xtreme Drilling Corp.
Consolidated Statements of Cash Flows

For the year ended December 31, 2017 and 2016
(in thousands of Canadian dollars)

 2017 2016 
Cash flow provided by:  
Operating activities  
Net loss(78,769)(76,713)
Items not affecting cash:  
Depreciation expense27,488 44,920 
Impairment of property and equipment and assets held for sale30,195 11,895 
Stock-based compensation716 3,285 
Loss on disposal of equipment and assets held for sale23,775 4,344 
Provision for doubtful accounts 892 
Interest expense322 2,142 
Interest paid(132)(2,142)
Amortization of debt issuance costs15 1,972 
Unrealized foreign exchange loss (gain)4 (2,119)
Current tax recovery(3,805)(1,402)
Taxes paid(2,939)(738)
Operating cash flows from continuing operations(3,130)(13,664)
Operating cash flows from discontinued operations(446)9,247 
Changes in items of non-cash working capital(10,658)27,004 
Net cash (used) generated from operating activities(14,234)22,587 
Financing activities  
Drawdowns (repayments) of secured borrowings 4,436   
Proceeds from long-term debt7,641  
Repayment of long-term debt (100,774)
Debt issuance cost(207)(1,409)
Purchase of common shares(25,245) 
Proceeds from exercise of stock options112 73 
Net cash used in financing activities(13,293)(102,110)
Investing activities  
Proceeds from sale of equipment and assets held for sale, net8,722 137 
Disposition of Mexico subsidiary(883) 
Capital expenditures(75,656)(11,091)
Investing activities of discontinued operations 195,597 
Changes in items of non-cash working related to capital items1,773 (1,566)
Net cash (used in) provided by investing activities(66,044)183,077 
Effect of exchange rate changes on cash and cash equivalents(4,808)(948)
(Decrease) increase in cash and cash equivalents(98,379)102,606 
Cash and cash equivalents - beginning of period113,829 11,223 
Cash and cash equivalents - end of period15,450 113,829 

Adjusted EBITDA from Continuing Operations

 Three months ended Twelve months ended
 Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016 
Net loss(9,564)(11,122)(78,769)(76,713)
Interest expense337  337 4,114 
Depreciation6,038 10,599 27,488 44,920 
Tax benefit(907)(2,614)(3,805)(1,402)

Non-cash items:
Impairment of property and equipment  30,195 11,895 
Stock-based compensation106 191 716 3,285 
Foreign exchange loss (gain)169 35 256 (1,171)
Loss (gain) on disposal of equipment4,645 2,784 23,775 4,344 
Total non-cash items4,920 3,010 54,942 18,353 

Non-recurring items:
Other income(6)(21)(74)(19)
Termination revenue   (459)
Other management compensation related to XSR sale   4,970 
Total non-recurring items(6)(21)(74)4,492 
Adjusted EBITDA818 (148)119 (6,236)

Adjusted EBITDA from Discontinued Operations

 Three months ended Twelve months ended
 Dec 31, 2017Dec 31, 2016 Dec 31, 2017Dec 31, 2016 
Net (loss) income(2,535) 55,874 
Depreciation and amortization 3,965 
Tax expense1,651 6,156 
Non-cash items:      
Gain on sale of equipment and assets held for sale (51,668)
Total non-cash items (51,668)
Adjusted EBITDA(884)14,327 

Adjusted EBITDA from Continuing and Discontinued Operations

 Three months ended   Twelve months ended
 Dec 31, 2017 Dec 31, 2016 Dec 31, 2017 Dec 31, 2016 
Adjusted EBITDA818 (1,032)119 8,091 
Adjusted EBITDA as a percentage of revenue5%(10)%0%10%
Net (loss) income per share ($)(0.13)(0.37)(0.99)(0.25)

Reader Advisory

This news release, or documents incorporated herein, contains forward-looking information (“FLI”). FLI is typically contained in statements with words such as “anticipate”, “believe”, “estimate”, “expect”, “plan”, “schedule”, “intend”, “propose” or similar words suggesting future outcomes or an outlook. More particularly, this news release contains FLI that may relate to contracting, marketing, financing, construction, modifications, deployment, operation, and utilization of drilling rigs in the Company’s current and future fleet. Although Xtreme believes expectations reflected in such FLI 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 FLI not to be correct, including risks and uncertainties inherent in the Company's business.

FLI is based on certain factors and assumptions including, but not limited to:

  • the assessment of current and projected future drilling and related operations;
  • ongoing and future strategic business alliances, negotiations and opportunities to enter new, extend or complete existing contracts;
  • the availability and cost of financing;
  • 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 equipment, services and supplies, including labor, in a cost-effective and timely manner;
  • the issuance of applied-for patents;
  • changes in tax structures and rates; and,
  • government regulations.

Although Xtreme considers the assumptions used to prepare this news release reasonable, based on information available to management as of this press release, ultimately the assumptions may prove to be incorrect.

FLI is 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;
  • currency exchange rates;
  • commodity prices;
  • access to credit and to equity markets;
  • the availability and retention of qualified personnel;
  • vendor-provided equipment components and services; and
  • competition for customers.

Management’s assumptions considered the following:

  • ongoing access to key services, supplies and equipment required to continue operating and maintaining the rigs, 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, multi-well contracts or other contracts;
  • revenue expectations related to shorter-term drilling opportunities;
  • willingness and ability of customers to remit amounts owing to Xtreme in accordance with normal industry practices; and,
  • management of accounts receivable in direct relation to revenue generation.

In preparing this news release, the following risk factors were considered:

  • fluctuations in crude oil and natural gas prices, as well as supply and demand;
  • fluctuation in currency exchange and interest rates;
  • financial stability of Xtreme’s customers;
  • current and future applications for Xtreme's proprietary technology;
  • related services provided by, and competition from, other drilling contractors;
  • regulatory and economic conditions in regions where Xtreme operates;
  • environmental constraints;
  • changes to government legislation;
  • international trade barriers or restrictions; and,
  • where appropriate, global economic, political and military events, as well as acts of terrorism, riots, strikes, insurrections, revolutions and civil war.

FLI 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 FLI 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 FLI to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such FLI or otherwise.

About Xtreme

Xtreme Drilling Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification AC drilling rigs featuring leading-edge proprietary technology. Currently Xtreme operates one service line - Drilling Services (XDR) - under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada and the United States. For more information about the Company, please visit

Xtreme Drilling Corp.
Matt Porter
President and Chief Executive Officer
+1 281 994 4600