Ensign Posts Lower Earnings for 2009
Ensign Energy recorded net income of $125.4 million ($0.82 per common share) for the year ended December 31, 2009, a 52 percent decrease from $260.0 million ($1.70 per common share) recorded in 2008. Operating earnings, expressed as EBITDA (defined as earnings before interest, taxes, depreciation, amortization and stock-based compensation), for 2009 were $309.0 million, a 38 percent decrease from EBITDA of $497.1 million for the twelve months ended December 31, 2008. Funds from operations similarly decreased 37 percent to $257.4 million ($1.68 per common share) in 2009 from $406.8 million ($2.66 per common share) in the prior year. The decrease in the Company's financial results is directly attributable to the impact of the unprecedented global economic crisis that weakened oil and natural gas supply and demand fundamentals for much of the year. The oilfield services industry experienced a significant reduction in demand, particularly in North America, as the exploration and production companies, the Company's customers, reacted to weak oil and natural gas demand and commodity prices.
Net income of $22.6 million ($0.15 per common share) for the fourth quarter of 2009 decreased 69 percent from net income of $73.8 million ($0.48 per common share) recorded in the fourth quarter of 2008. Net income for the fourth quarter of 2009 was negatively impacted by lower levels of demand for oilfield services and reduced margins resulting from a general over-supply of oilfield service equipment, particularly in North America. Gross margin was 28.8 percent for the fourth quarter of 2009 compared with 29.5 percent in the fourth quarter of 2008. The gross margin was negatively impacted by fourth quarter maintenance expenditures in preparation for the Canadian winter drilling season and reduced margins from United States operations as price reductions associated with contract renegotiations were implemented during the fourth quarter.
Despite the challenging environment, the Company's established geographic diversification and strong balance sheet allowed it to take advantage of opportunities to continue to grow. The 14 Automated Drill Rig ("ADR(TM)") and seven well servicing rig new build program that commenced in 2008 was completed in December 2009, continuing the enhancement of the Company's technical capabilities and bolstering its presence in key markets. Two of the newly constructed ADR(TM)-1500 drilling rigs marked the entry of the Company into the promising Haynesville shale gas play in Louisiana. The Company also took advantage of an opportunity to enter the oilfield services market in Mexico, acquiring FE Services Holdings, Inc. ("Foxxe Energy") and its fleet of six drilling rigs in December 2009. A total of $185.1 million was spent on acquisitions and the purchase of additional equipment in 2009, down 33 percent from the $274.3 million invested in new equipment in 2008.
The Company increased its quarterly dividend declared in the fourth quarter of 2009 to a rate of $0.0875 per common share, an increase of three percent from the 2009 third quarter rate of $0.0850 per common share. This modest increase maintains the Company's annual dividend increase trend dating back to the first dividend paid in 1995. Additionally, the Company extinguished its long-term debt in 2009 by the early repayment of a promissory note payable with a face value of $20.0 million. This promissory note was issued in July 2008 in connection with the purchase of 12 specialty drilling rigs and related equipment. The Company utilized existing cash resources to extinguish the debt which bore interest at a rate fixed above current market rates of interest.
Working capital at December 31, 2009 was $107.9 million compared to $107.0 million at December 31, 2008. Positive working capital and no long-term debt means that the balance sheet remains a source of strength for the Company. A strong balance sheet, financial discipline, commitment to safety, geographic diversification and the drive to be a technological leader are the cornerstones of a proven strategy that will enable Ensign to continue to grow opportunistically and generate positive returns throughout the challenges of a cyclical industry.
- Ensign Rig Heads to PetroFrontier's MacIntyre Well (May 31)
- Rowan Parts with Land Drilling Division (Jul 20)
- Ensign Posts Lower Earnings for 2009 (Mar 15)