AKITA Reports Third Quarter Results
AKITA Drilling announced third quarter earnings and funds flow. AKITA Drilling Ltd.'s net earnings for the nine months ended September 30, 2007 were $14,374,000 or $0.79 per share on revenue of $110,182,000. Comparative figures for 2006 were $25,400,000 or $1.37 per share of net earnings on revenue of $132,980,000. Funds flow from operations for the period was $27,803,000 compared to $35,666,000 in 2006.
Earnings for the three months ended September 30, 2007 were $2,196,000 ($0.12 per share) on revenue of $29,964,000 compared to $6,850,000 ($0.37 per share) on revenue of $38,856,000 in 2006. Funds flow from operations for the quarter ended September 30, 2007 was $6,120,000 compared to $10,389,000 in the corresponding quarter in 2006.
Reduced drilling industry activity had a negative impact on day rates for all sizes of rigs that were not working under term contracts. Weaker market conditions have also resulted in fewer opportunities for investment in new rigs. Consequently, AKITA has focused its efforts on strengthening its already strong balance sheet. At September 30, 2007, the Company had $53,098,000 in working capital and no long-term debt.
Management anticipates that the reduction in demand that impacted third quarter results will extend into the fourth quarter and throughout the winter drilling season. Although crude oil prices are strong and the market for heavy oil pad rigs continues to provide optimism, drilling for natural gas has historically been the largest component of AKITA's market. In contrast to crude oil, natural gas prices must increase and remain higher in order for AKITA to show sustainable improvement in this market. Although the Company has work plans for approximately 90% of its fleet for the winter, this implies a weaker outlook than would have been present for the corresponding time in 2006 since not all active rigs will have continuous work for the upcoming winter.
On October 25, 2007, the Alberta government released its revised provincial royalty framework for crude oil and natural gas. The effects of this new royalty structure, scheduled to become effective in 2009, are uncertain but could affect future drilling activity in Alberta.
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- Akita Drilling CEO Hlavka Retires, Ruud Appointed to Take His Place (May 19)