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Trinidad Drilling Reports Second Quarter and Year-to-Date 2018 Results; Increased Activity and Higher Dayrates Drive Strong Improvement

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Trinidad Drilling Reports Second Quarter and Year-to-Date 2018 Results; Increased Activity and Higher Dayrates Drive Strong Improvement

Canada NewsWire

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

CALGARY, Aug. 7, 2018 /CNW/ - Trinidad Drilling Ltd. (TSX:TDG) (Trinidad) announced its second quarter and year-to-date 2018 results today.

In the three and six months ended June 30, 2018, industry conditions significantly improved compared to the prior year, driving higher operating days, higher dayrates and stronger operating income from the same periods last year. For the three and six months ended June 30, 2018, activity increased by 18.6% and 14.9%, respectively, and operating income increased by 73.6% and 28.2%, respectively, compared to 2017.

Improving dayrates in both Canada and the US in 2018, combined with the Company's ongoing focus on operational efficiency, also resulted in higher adjusted EBITDA1 in the current year. Adjusted EBITDA was up 125.0% in the quarter and 7.5% year to date, compared to the same periods last year. Lastly, higher adjusted EBITDA and lower interest paid resulted in higher funds flow in the current year, up 192.5% in the quarter and 392.0% year to date, compared to the same periods in 2017.

During the second quarter of 2018, the outlook for Trinidad's international joint venture (TDI) also improved with the activation of one rig in Bahrain, and a contract awarded to redeploy two idle rigs to Kuwait for operations beginning in 2019.

"While Trinidad has benefited from improving industry conditions in the first half of the year, we have also made changes within the Company that are beginning to show positive results," said Brent Conway, Trinidad's President and Chief Executive Officer. "We have improved operational efficiency through better supply chain and project management, we have reduced overhead costs and sold non-core or idle assets. In addition, we have positioned our fleet to capture market share and higher margins by moving rigs to areas of higher demand and upgrading select rigs to meet customer requirements."

(1)

See Non-GAAP Measures Definitions and Additional GAAP Measures Definitions section of this document for further details.

SECOND QUARTER AND YEAR-TO-DATE 2018 HIGHLIGHTS

  • For the three and six months ended June 30, 2018, revenue increased by 28.1% and 20.9%, respectively, compared to the comparable periods in 2017 due to higher base dayrates and higher activity levels in both of Trinidad's US and Canadian drilling divisions; partly offset by lower early termination and standby revenue recorded in 2018.

  • Trinidad's US and international operations recorded higher operating revenue and a stronger operating income - net percentage for the three and six months ended June 30, 2018, compared to the prior year. Increased activity combined with consistent operating expense per day in the current year drove improved profitability in the US drilling division in 2018.

  • In the second quarter and year to date, Trinidad's Canadian operations increased activity by 24.4% and 6.4%, respectively, compared to 2017. Improving market conditions and strong customer demand drove increased activity and contracted dayrates in the current year. On a year-to-date basis, operating income and operating income - net percentage were negatively impacted by lower early termination and standby revenue recorded in 2018. As early termination and standby revenue is recorded with minimal associated costs, it positively impacts operating income - net percentage. Adjusted for these balances, operating income and operating income - net percentage increased for both the three and six months ended June 30, 2018.

  • Trinidad's joint venture operations recorded lower revenue and lower operating income compared to the prior year. Although Bahrain commenced activity in the second quarter of 2018 and Trinidad began mobilizing rigs to Kuwait, lower operating days in Saudi Arabia and Mexico, combined with higher operating expenses related to mobilization and shut down costs on a year-to-date basis, negatively impacted 2018 results.

  • For the three and six months ended June 30, 2018, Trinidad recorded adjusted EBITDA of $33.0 million and $70.8 million, respectively, an increase of 125.0% and 7.5%, respectively, compared to the prior year. Increased activity and improving market dayrates recorded in each of Trinidad's Canadian and US drilling divisions in the current year improved operating income compared to the prior year. Additionally, Trinidad recorded lower G&A expenses in 2018, when compared to the prior year, as a result of lower salary and rent expenses in 2018. Rent expense decreased due to a $2.8 million one-time lease incentive credit adjustment recorded in the second quarter of 2018. This was slightly offset by $9.3 million lower early termination and standby revenue recorded in 2018 on a year-to-date basis and a lower contribution from the Company's TDI joint venture operations in 2018.
     
  • Net (loss) increased in the second quarter of 2018 mainly due to higher depreciation and amortization expense due to a change in the useful life estimates in the third quarter of 2017 and a lower gain from investments in joint ventures recorded in the current year. This was offset by higher operating income due to higher activity in 2018, lower G&A expenses and lower finance costs on a year-to-date basis.

  • For the three and six months ended June 30, 2018, funds flow increased compared to 2017 due to increased activity in the current year resulting in higher operating income, combined with lower interest paid in 2018.

  • Trinidad's total long-term debt balance decreased by $36.6 million in the six months ended June 30, 2018. The reduction in long-term debt was mainly due to a reduction of the outstanding credit facility balance of $59.5 million, offset slightly by an increase in the Senior Notes which was due entirely to foreign currency fluctuations in the period. Higher activity in 2018 combined with a distribution of $48.9 million received in the second quarter of 2018 from Trinidad's TDI joint venture, allowed the Company to pay down long-term debt in the current year.

  • In 2018, Trinidad spent $23.2 million on capital expenditures, compared to $58.6 million in 2017. Capital spend in the current period mainly related to upgrades and enhancements on rigs moving to Trinidad's US drilling division, as well as maintenance across Trinidad's entire rig fleet. The Company continues to recognize cost savings in 2018 related to the Company's focus on supply chain management.

HIGHLIGHTS





Three months ended June 30,

Six months ended June 30,

($ thousands except share and per share data)

2018

2017

% Change

2018

2017

% Change

FINANCIAL HIGHLIGHTS







Revenue

129,578

101,166

28.1

282,825

233,903

20.9

Operating income (1)

41,185

23,726

73.6

92,743

72,364

28.2

Operating income - net percentage (1)

33.1%

24.9%

32.9

35.0%

32.8%

6.7

Adjusted EBITDA (1)

32,977

14,655

125.0

70,837

65,914

7.5


Per share (diluted) (2)

0.12

0.05

140.0

0.26

0.25

4.0

Funds flow (1)

30,761

10,517

192.5

52,913

10,754

392.0


Per share (basic / diluted) (2)

0.11

0.04

175.0

0.19

0.04

375.0

Net (loss) (3)

(11,882)

(5,583)

(112.8)

(34,344)

(17,519)

(96.0)


Per share (basic/diluted) (2)(3)

(0.05)

(0.02)

(150.0)

(0.13)

(0.07)

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