Trinidad Drilling reported operating and financial results for 2009 reflecting strong gross margins, improved financial flexibility and expanded US and international operations.
"This past year has been a year of challenges across most industries and for most countries around the world, but it has also been a year of opportunity for Trinidad. These challenging times have given us an opportunity to demonstrate the strength of our business strategy and an opportunity to outperform our competitors," said Lyle Whitmarsh, Trinidad's President and Chief Executive Officer. "Trinidad's fleet of modern, deep rigs has positioned it as a leader in the unconventional shale plays across North America. Having the right style of equipment coupled with extensive long-term contract coverage has allowed us to keep our operations busy during an extremely competitive period. In addition, our unwavering focus on executing our business strategy has enabled us to expand our operations on several fronts in 2009."
Trinidad generated solid Adjusted net earnings(1) and Adjusted EBITDA(1) in 2009, a significant achievement given the challenging operating environment within which the Company was working. Adjusted net earnings were $29.8 million in 2009 while Adjusted EBITDA(1) was $193.5 million, compared to $89.3 million and $256.5 million in 2008, respectively.
2009 OPERATING HIGHLIGHTS
(Quarter-over-quarter and full-year comparatives all relate to the comparable period in 2008)
- Trinidad's average Canadian drilling utilization rate in 2009 was 35%, down from 57% in the previous year due to weak industry conditions. The Company continued its track record of substantially exceeding Canadian industry utilization which averaged 24% in 2009. In the fourth quarter, Trinidad's average Canadian drilling utilization rate was 44%, up from 36% in the third quarter and above Canadian industry utilization of 32% for the fourth quarter of 2009, but below the 61% recorded in the fourth quarter of 2008.
- The US and International drilling operations utilization levels averaged 63% in 2009 compared to 85% in 2008, reflecting the significant slowdown in drilling activity in the US during 2009. US industry land rig counts for 2009 averaged 1,036 rigs, down 42.2% from 1,791 rigs in 2008. Similar to Canada, utilization levels improved slightly in the fourth quarter, averaging 63% compared to 61% in the third quarter. However, utilization rates remained below the 80% level recorded in the fourth quarter of 2008.
- During 2009, Trinidad added six new high-tech, deep-capacity drilling rigs to its fleet. The rigs are all under long-term, take-or-pay contracts and are operating in the US unconventional shale plays.
- In 2009, Trinidad expanded its Latin American presence by redeploying five existing, under-utilized rigs from its Canadian and US operations to higher-dayrate and higher-utilization areas in Mexico and Chile; bringing this to a total of 8 rigs operating in Latin America.
2009 FINANCIAL HIGHLIGHTS
- Revenue for the full year in 2009 was $582.6 million and $148.2 million for the fourth quarter, down 23.1% and 27.8% respectively. Reduced revenue levels in 2009 reflected weak industry conditions present throughout the year and lower utilization levels across Trinidad's fleet.
- Trinidad maintained a strong gross margin percentage(1) in 2009 through a combination of cost reduction initiatives and contracted dayrates. In 2009, gross margin percentage was 42.4% compared to 40.8% in 2008. In the fourth quarter, gross margin percentage remained stable at 40.3% compared to 41.0% for the same period in 2008.
- Adjusted EBITDA(1) was $47.4 million in the fourth quarter of 2009 and $193.5 million in the full year, down 31.9% and 24.5%, respectively. Lower revenues were the main factor causing the decline in 2009. The decline in revenues was partly offset by lower operating costs.
- Adjusted net earnings(1) were $29.8 million ($0.28 per share (diluted)) compared to $89.3 million ($0.98 per share (diluted)) in 2008, a decrease of 67.0%. In addition to lower revenues, this decrease was also impacted by lower depreciation costs, a loss recorded on the sale of assets, partly offset by lower interest expenses.
- Net earnings in the fourth quarter of 2009 was $3.9 million ($0.03 per share (diluted)) and a net loss of $22.4 million (($0.21) per share (diluted)) for the full year, a decrease in earnings of 82.1% and 127.3%, respectively. In 2009, Trinidad recorded an intangible asset impairment charge of $23.2 million, due to weak industry conditions in the barge drilling market. Net earnings before impairment of intangible assets(1) for 2009 was $0.1 million ($0.01 per share (diluted)) down 99.4% from 2008's net earnings before impairment of goodwill. These lower earnings were a result of items mentioned above.
- At December 31, 2009, Trinidad's net debt(1) was $456.9 million, down 18.3% from the previous year. Net debt levels decreased largely due to the application of proceeds raised through a $140.0 million equity offering in June of 2009.
(1) Please see the Non-GAAP Measures Definitions section of this MD&A for further details.