CanElson's Growth Plans Continue To Take Shape

CanElson's Growth Plans Continue To Take Shape After continued growth and strong second quarter results, CanElson Drilling Inc. announced this morning that its common shares will begin trading on the Toronto Stock Exchange (TSX) at the opening on Sept. 13, 2011. As a result, the company’s shares will be delisted from the TSX Venture Exchange at the same time. CanElson said its common shares will continue to trade under the trading symbol “CDI.” Currently, the company has 73.14 million common shares issued and outstanding. “Listing on the TSX was a logical next step given the rapid growth of CanElson from one rig in December 2008 to 33 rigs [36 by January 2012] today. We envision that the TSX listing will increase the liquidity of the company’s common shares and provide greater access to capital,” president and chief executive officer Randy Hawkings said in a statement. As of Sept. 12, CanElson was operating 33 rigs: 19 drilling rigs in the Western Canadian Sedimentary Basin, six (five net) drilling rigs in Texas, four drilling rigs in North Dakota, as well as two (one net) drilling rigs and two (one net) service rigs in the Misantla-Tampico Basin of Mexico. Of note, the company’s owned drilling rig fleet has an average age of less than five years, an average total vertical depth rating of 3,700 metres, and all rigs are capable of drilling horizontal and resource play wells. In an operational update, the company said that as of Sept. 12, 100 per cent of its Canadian rig fleet is drilling and during the first two months of the third quarter CanElson’s Canadian rig fleet has operated at 77 per cent utilization. The company said its expectation for the remainder of the third quarter is full operating activity with all of the rigs contracted. As well, CanElson said 90 per cent of its United States rig fleet is drilling and during the first two months of the third quarter the rig fleet operated at 75 per cent utilization, which was negatively impacted by wet weather conditions in North Dakota. All of the rigs in the U.S. are contracted and full operating activity is expected in west Texas as well as North Dakota for the remainder of the third quarter, subject to moving truck availability. Given the present market demand for CanElson’s style of resource-based drilling rigs, the company expects to continue to have strong activity levels for the remainder of 2011 and into 2012. In June, as part of the 2011 drilling rig construction program, the first of five purpose-built small footprint ultra-heavy-duty telescoping double drilling rigs (tele-double) was deployed to west Texas. The second rig was deployed to northern Alberta at the end of August. The third rig is expected to be deployed to the field by the end of September to northern Alberta. “We expect the remaining two rigs from the 2011 rig construction program to be deployed as originally anticipated by November 2011 and January 2012, respectively,” the company said. Meanwhile, during the second quarter the company’s revenues increased 127 per cent to $25.14 million from $11.1 million during the same period last year. Earnings improved to $3.33 million from a net loss of $630,000 a year earlier, while cash flow was up more than 1,900 per cent to $6.05 million from $300,000 for the three months ended June, 30, 2010. Quarterly results benefited from the growth in CanElson’s drilling rig fleet to 26.5 (24.5 net) average rigs available for operation compared to an average of 8.1 (7.1 net) drilling rigs the prior year, and a revenue rate increase to an average of $28,400 per rig operating day compared to $26,500 per rig operating day in 2010. As well, the company said it achieved strong financial results during the seasonally weak second quarter as foreign operations in the U.S. and Mexico made significant contributions to revenue, while much of the domestic rig operations were curtailed due to exceptionally wet spring conditions, including flood conditions in southeast Saskatchewan. Financial results for the six months ended June 30, 2011, were also strongly improved year-over-year (see tables). During the second quarter the company continued to focus its growth on rigs capable of drilling horizontal and resource play wells with the acquisition of 100 per cent of the outstanding units of Redhawk Drilling, LLC for approximately $19 million. Redhawk operated four drilling rigs in North Dakota, which were primarily drilling horizontal wells. That aligns with the company’s focus on rigs capable of drilling resource play wells and adds operations in a region that is pursuing oil-based drilling activity. “We continued to focus our growth on oil and liquids weighted resource plays with the acquisition of Redhawk in June,” Hawkings said. “The addition of Redhawk combined with our west Texas operations provides exposure to approximately 56 per cent of the U.S. oil-directed drilling market.” CanElson Drilling Inc. Financial Summary (Million $) Profit Profit Per Share Cash Flow Cash Flow Per Share Revenue Capital Expenditures Three Months Ended June 30 2011 (Note 1) $3.33 $0.05 $6.05 $0.08 $25.14 $31.29 2010 (Note 1) ($0.63) ($0.02) $0.30 $0.01 $11.10 $10.17 Six Months Ended June 30 2011 (Note 1) $10.07 $0.15 $18.86 $0.29 $66.09 $108.57 2010 (Note 1) ($0.32) ($0.01) $1.77 $0.06 $22.71 $17.25 Three Months Ended June 30 2010 (Note 2) $0.01 $0.75 $0.03 $11.10 $10.81 2009 (Note 2) ($0.56) ($0.02) ($0.48) ($0.02) $0.28 Six Months Ended June 30 2010 (Note 2) $0.32 $0.01 $2.14 $0.08 $22.71 $17.89 2009 (Note 2) $0.13 $0.99 $0.04 $2.98 $5.52 Note 1 = IFRS accounting Note 2 = GAAP accounting