ACT Energy Technologies Reports 2024 Q2 Interim Results
/NOT FOR DISSEMINATION IN
2024 Q2 KEY HIGHLIGHTS
The Company achieved the following 2024 Q2 results and highlights:
- Revenues of
$130.3 million in 2024 Q2, were the highest for any second quarter in the Company's history and increased 7%, compared to$121.3 million in 2023 Q2. - Adjusted EBITDAS (1) of
$17.3 million in 2024 Q2 decreased 5%, compared to$18.2 million in 2023 Q2. Lost-in-hole equipment net reimbursements were significantly lower in 2024 Q2, compared to 2023 Q2 and 2024 Q1 levels. - Canadian operating days increased 28% in 2024 Q2, compared to 2023 Q2, which compares favourably to an 8% increase in the Western Canadian rig count (2). ACT remains extremely active in oil plays where wells have a high multilateral count.
-
U.S. operating days decreased 5% in 2024 Q2, compared to 2023 Q2, mainly due to a 17% decline of theU.S. land rig count (2). - An increase in the Canadian average revenue per operating day of 7% in 2024 Q2, compared to 2023 Q2.
- An increase in the
U.S. average revenue per operating day of 6% in 2024 Q2, compared to 2023 Q2, despite a decrease in operating days. - Net income of
$5.3 million in 2024 Q2, compared to$2.4 million in 2023 Q2. - Cash flow - operating activities of
$34.1 million in 2024 Q2, compared to$16.4 million in 2023 Q2, mainly attributable to the change in non-cash working capital. - Free cash flow deficit (1) of
$3.0 million in 2024 Q2, compared to Free cash flow (1) of$5.0 million in 2023 Q2. - On
May 9, 2024 , the shareholders of the Company approved the consolidation of the issued and outstanding common shares of the Company. As a result, onJuly 3, 2024 , 243,383,392 common shares issued and outstanding prior to the Consolidation (the "Consolidation") were reduced to 34,769,056 common shares (one post-consolidation common share for seven pre-consolidation common shares). - Loans and borrowings less cash was
$55.7 million as atJune 30, 2024 , compared to$67.9 million as atDecember 31, 2023 . The Company will remain focused on reducing its loans and borrowings and generating Free cash flow (1) for the remainder of 2024. - The Company continues to see a significant opportunity for margin expansion in its
U.S. directional business by using Rime Downhole Technologies ("Rime") supplied Measurement-While-Drilling ("MWD") systems to reduce its third-party rental costs. To date, ten Rime MWD systems have been deployed with an additional forty MWD systems expected to be deployed by the first half of the 2025. - The Company purchased two additional Rotary Steerable Systems ("RSS") Orbit tools, expanding its
U.S. fleet to twenty-one RSS tools.
(1) |
As defined in the "Non-GAAP measures" section of this news release. |
(2) |
Per |
PRESIDENT'S MESSAGE
Comments from President & CEO
"We recently completed a corporate name change and re-brand to ACT Energy Technologies, which recognizes the significant growth and transformation of the Company that has occurred through the culmination of eight acquisitions over a two-year period. The name ACT honours the legacy and accomplishments of both
"Altitude's full-service directional operations in
"ACT achieved its highest ever corporate revenues for a second quarter while Adjusted EBITDAS was slightly lower year-over-year ("yr/yr") due to a combination of higher selling, general and administration expenses and lower contribution from lost-in-hole activity. Driving the record topline was a 37% yr/yr increase in Canadian revenues and a 28% yr/yr increase in Canadian operating days. For context, this strong Canadian performance compares to an 8% increase in the average Western Canadian rig count in the same period (source: Rig Locator).
"The Company's technology suite is particularly well-suited to drill wells that have a high multi-lateral count and the proliferation of this type of drilling in Canadian oil-related markets has helped support stronger and more consistent levels of activity. More capital discipline from Canadian exploration and production companies has also resulted in more consistent spending levels, resulting in more robust activity levels in the second quarter, compared to historical norms as operators smooth out or "level-load" activity levels to drive efficiencies.
"Our
"With a significant portion of our daily revenue dedicated to third-party rental expense, our single biggest opportunity for growth leading into 2025 is the deployment of our own Rime-supplied MWD systems for the
"With a relatively modest capital investment, successful deployment of a sizable MWD fleet is our highest priority as it provides the highest potential returns on capital versus any other investment opportunity before us. Finally, our
"We continued to strengthen our balance sheet in the second quarter with reduced debt levels and increased cash balances related to the cyclical working capital harvest that occurs with seasonal activity lows, following a relatively busy first quarter in
"Finally, I want to thank all those at ACT in the
FINANCIAL HIGHLIGHTS
(unaudited)
Canadian dollars in 000's (except for otherwise noted)
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|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Revenues (2) |
$ 130,297 |
$ 121,339 |
$ 295,253 |
$ 254,287 |
|
|
|
|
|
Gross margin % (2) |
21 % |
18 % |
21 % |
17 % |
Adjusted gross margin % (1)(2) |
26 % |
26 % |
27 % |
25 % |
|
|
|
|
|
Adjusted EBITDAS (1) |
$ 17,305 |
$ 18,222 |
$ 46,054 |
$ 33,409 |
Per share - basic (3) |
$ 0.50 |
$ 0.54 |
$ 1.33 |
$ 1.01 |
Per share - diluted (3) |
$ 0.45 |
$ 0.53 |
$ 1.20 |
$ 0.98 |
Adjusted EBITDAS margin % (1) |
13 % |
15 % |
16 % |
13 % |
|
|
|
|
|
Cash flow - operating activities (2) |
$ 34,123 |
$ 16,407 |
$ 49,866 |
$ 44,267 |
Free cash flow (deficit) (1)(2) |
$ (2,997) |
$ 4,969 |
$ 453 |
$ 4,143 |
|
|
|
|
|
Net income |
$ 5,259 |
$ 2,416 |
$ 16,840 |
$ 3,210 |
Per share - basic (3) |
$ 0.15 |
$ 0.07 |
$ 0.49 |
$ 0.10 |
Per share - diluted (3) |
$ 0.14 |
$ 0.07 |
$ 0.44 |
$ 0.09 |
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
Basic (000s) (3) |
34,439 |
34,057 |
34,574 |
33,074 |
Diluted (000s) (3) |
38,402 |
34,380 |
38,490 |
34,081 |
Balance, |
|
|
|
|
|
Working capital, excluding current portion of loans and borrowings (1) |
$ 74,876 |
$ 74,865 |
Total assets |
$ 420,371 |
$ 403,733 |
Loans and borrowings |
$ 72,683 |
$ 78,598 |
Shareholders' equity |
$ 200,695 |
$ 179,468 |
(1) |
Refer to the "Non-GAAP Measures" section in this news release. |
(2) |
Refer to the "Reclassifications" section in this news release. |
(3) |
Restated to reflect the 7:1 share consolidation on |
OUTLOOK
The outlook for global energy demand remains constructive driven by general economic growth, the increasing energy requirements of emerging technology, and the continued growth and development of third world nations. Oil prices continue to trade in relatively healthy ranges despite concerns of a potential recession in
In
ACT moves into the third quarter of 2024 with the strongest Q3 Canadian job count in its history. Recent increases in oil and natural gas takeaway capacity are driving year-over-year growth in underlying Western Canadian activity levels and ACT continues to outperform this baseline.
In the
With a continued increase in well complexity and a focus on increasing production per well, ACT is well positioned to use its leading technology to help its customers maximize efficiency, which will support more consistent job counts and revenue levels, relative to the market in the quarters to come. With an internal opportunity set to support growth, we believe that the Company has some compelling drivers to further expand its business versus a flat market environment for the majority of the industry over the next twelve to eighteen months.
2023 ACQUISITION
On
RECLASSIFICATIONS
The Company has changed the presentation of certain figures in 2023 Q2 related to equipment lost-in-hole reimbursements collected from customers and the corresponding derecognition of the property, plant and equipment ("PP&E").
More specifically, the Company reclassified its gain on disposal of PP&E as follows: a) reclassified the proceeds on disposal of PP&E, related to lost-in-hole equipment, to revenues and b) recognized a write-off of PP&E for the net book value of the lost-in-hole equipment on the condensed consolidated statement of comprehensive income. In addition, the lost-in-hole proceeds were reclassified from the Company's cash flows - investing activities to the cash flows - operating activities on the condensed consolidated statement of cash flows.
The Company has changed its judgement regarding equipment lost-in-hole events that are contracted with its customers in that these events are now considered to be part of its ordinary business activities. The changes are reflected in the current and prior periods, as described above.
These reclassifications recognized in 2023 Q2 are summarized below:
Condensed Consolidated Statement of Comprehensive Income (Excerpt)
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|
Reported |
Adjustment |
Adjusted |
|
Reported |
Adjustment |
Adjusted |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
$ 93,543 |
$ 4,965 |
$ 98,508 |
|
$ 175,865 |
$ 7,595 |
$ 183,460 |
|
21,515 |
1,316 |
22,831 |
|
66,858 |
3,969 |
70,827 |
Total revenues |
115,058 |
6,281 |
121,339 |
|
242,723 |
11,564 |
254,287 |
Cost of sales |
(98,720) |
(1,106) |
(99,826) |
|
(209,321) |
(2,445) |
(211,766) |
Gross margin |
16,338 |
5,175 |
21,513 |
|
33,402 |
9,119 |
42,521 |
|
|
|
|
|
|
|
|
Write-off of PP&E |
— |
(745) |
(745) |
|
— |
(1,721) |
(1,721) |
(Gain) loss on disposal of PP&E |
$ 4,091 |
$ (4,430) |
$ (339) |
|
$ 7,135 |
$ (7,398) |
$ (263) |
Condensed Consolidated Statement of Cash Flows (Excerpt)
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|
Reported |
Adjustment |
Adjusted |
|
Reported |
Adjustment |
Adjusted |
|
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
Write-off of PP&E |
$ — |
$ 745 |
$ 745 |
|
$ — |
$ 1,721 |
$ 1,721 |
(Gain) loss on disposal of PP&E |
(4,091) |
4,430 |
339 |
|
(7,135) |
7,398 |
263 |
Cash flow - operating activities |
11,232 |
5,175 |
16,407 |
|
35,148 |
9,119 |
44,267 |
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
PP&E additions |
$ (8,714) |
$ (1,329) |
$ (10,043) |
|
$ (22,465) |
$ — |
$ (22,465) |
Proceeds on disposal of PP&E |
4,208 |
(3,839) |
369 |
|
9,780 |
(9,117) |
663 |
Cash flow - investing activities |
(4,354) |
(5,168) |
(9,522) |
|
(14,584) |
(9,117) |
(23,701) |
Effect of exchange rate on changes on cash |
$ (990) |
$ (7) |
$ (997) |
|
$ (1,044) |
$ (2) |
$ (1,046) |
RESULTS OF OPERATIONS
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|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Revenues |
|
|
|
|
|
$ 99,069 |
$ 98,508 |
$ 205,631 |
$ 183,460 |
|
31,228 |
22,831 |
89,622 |
70,827 |
Total revenues (2) |
130,297 |
121,339 |
295,253 |
254,287 |
Cost of sales |
|
|
|
|
Direct costs (2) |
(96,764) |
(89,615) |
(214,364) |
(192,186) |
Depreciation and amortization |
(6,180) |
(10,115) |
(17,815) |
(19,340) |
Share-based compensation |
(169) |
(96) |
(392) |
(240) |
Cost of sales |
(103,113) |
(99,826) |
$ (232,571) |
$ (211,766) |
|
|
|
|
|
Gross margin (2) |
$ 27,184 |
$ 21,513 |
$ 62,682 |
$ 42,521 |
|
|
|
|
|
Gross margin % (2) |
21 % |
18 % |
21 % |
17 % |
Adjusted gross margin % (1)(2) |
26 % |
26 % |
27 % |
25 % |
|
|
|
|
|
(1) |
Refer to the "Non-GAAP Measures" section in this news release. |
(2) |
Refer to the "Reclassifications" section in this news release. |
SEGMENTED INFORMATION
Revenues
Direct costs
Canadian
Revenues
Canadian revenues were
Canadian revenues were
Direct costs
Canadian direct costs included in cost of sales were
Canadian direct costs included in cost of sales were
CONSOLIDATED
Revenues
The Company recognized
The Company recognized
Direct costs
The Company recognized
The Company recognized
Direct costs as a percentage of revenues was 74% in 2024 Q2 and 2023 Q2. Direct costs as a percentage of revenue decreased to 73% in the six months ended
Gross margin and adjusted gross margin
The Gross margin % increased to 21% in 2024 Q2, compared to 18% in 2023 Q2. The Gross margin % increased to 21% in the six months ended
The Adjusted gross margin % was 26% in 2024 Q2 and 2023 Q2. The Adjusted gross margin % increased to 27% in the six months ended
Depreciation and amortization expense
Depreciation and amortization expense included in cost of sales decreased to
In 2024 Q1, the Company assessed its depreciation methodology related to its property, plant and equipment. As a result, the Company determined that using a straight-line method of depreciation, rather than the declining balance method, more accurately reflects the future economic benefits of the related assets. The depreciation expense included in cost of sales decreased due to the change in methodology.
Depreciation and amortization expense included in cost of sales as a percentage of revenues was 5% and 6% in 2024 Q2 and the six months ended
Selling, general and administrative ("SG&A") expenses
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|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Selling, general and administrative expenses: |
|
|
|
|
Direct costs |
$ 14,808 |
$ 12,004 |
$ 30,834 |
$ 26,090 |
Depreciation and amortization |
2,462 |
1,499 |
4,809 |
3,008 |
Share-based compensation |
719 |
674 |
1,649 |
1,449 |
Selling, general and administrative expenses |
$ 17,989 |
$ 14,177 |
$ 37,292 |
$ 30,547 |
The Company recognized direct costs included in SG&A expenses of
Direct costs included in SG&A expenses as a percentage of revenues were 11% and 10% in 2024 Q2 and the six months ended
Depreciation and amortization included in SG&A expenses were
Stock-based compensation included in SG&A expenses were
Research and development ("R&D") costs
The Company recognized R&D costs of
Write-off of property, plant and equipment
The Company recognized a write-off of property, plant and equipment of
Finance costs
Finance costs - loans and borrowings and EP Notes were
In addition, the Company had finance costs of
Foreign exchange
The Company recognized a foreign exchange gain of
The Company recognized a foreign currency translation gain on foreign operations of
Income tax
The Company recognized an income tax expense of
Income tax expense is booked based upon expected annualized rates using the statutory rates of 23% for both
LIQUIDITY AND CAPITAL RESOURCES
Annually, the Company's principal source of liquidity is cash generated from its operations. In addition, the Company has the ability to fund liquidity requirements through its Credit Facility and the issuance of additional debt and/or equity, if available.
In order to facilitate the management of its liquidity, the Company prepares an annual budget, which is updated, as necessary, depending on varying factors, including changes in capital structure, execution of the Company's business plan and general industry conditions. The annual budget is approved by the Board of Directors and updated forecasts are prepared as the fiscal year progresses with changes reviewed by the Board of Directors.
Cash flow - operating activities was
At
Normal course issuer bid
In the six months ended
On
Syndicated and revolving credit facilities
On
During the six months ended
During the six months ended
In addition, the Company held its Highly Affected Sectors Credit Availability Program ("HASCAP") loan with a balance of
At
- Consolidated Funded Debt to Consolidated Credit Agreement EBITDA ratio shall not exceed 2.5:1; and
- Consolidated Fixed Charge Coverage ratio shall not be less than 1.25:1.
Contractual obligations and contingencies
As at
The Company also holds six letters of credit totaling
The Company is involved in various other legal claims associated with the normal course of operations. The Company believes that any liabilities that may arise pertaining to such matters would not have a material impact on its financial position.
The following table outlines the anticipated payments related to contractual commitments subsequent to
|
Carrying amount |
One year |
1-2 years |
3-5 years |
Thereafter |
|
|
|
|
|
|
Loans and borrowings - principal |
$ 73,150 |
$ 21,169 |
$ 20,400 |
$ 31,581 |
$ — |
EP Notes - principal |
27,358 |
— |
— |
27,358 |
— |
Interest payments on loans and borrowings and EP Notes |
10,473 |
6,061 |
4,314 |
98 |
— |
Lease liabilities - undiscounted |
14,396 |
4,041 |
3,115 |
6,600 |
640 |
Trade and other payables |
95,077 |
95,077 |
— |
— |
— |
Total |
$ 220,454 |
$ 126,348 |
$ 27,829 |
$ 65,637 |
$ 640 |
Capital structure
As at
Share Consolidation
On
NET CAPITAL EXPENDITURES
The following table details the Company's Net capital expenditures:
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|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Motors and related equipment |
$ 6,738 |
$ 7,365 |
$ 13,944 |
$ 14,781 |
MWD and related equipment |
6,308 |
90 |
14,219 |
3,273 |
Shop and automotive equipment |
149 |
973 |
382 |
1,750 |
Other |
869 |
1,122 |
1,438 |
2,661 |
Gross capital expenditures |
$ 14,064 |
$ 9,550 |
$ 29,983 |
$ 22,465 |
|
|
|
|
|
Less: net lost-in-hole equipment reimbursements |
(4,742) |
(6,372) |
(15,388) |
(11,889) |
Net capital expenditures (1) |
$ 9,322 |
$ 3,178 |
$ 14,595 |
$ 10,576 |
(1) |
Refer to the "Non-GAAP Measures" section in this news release. |
In 2024 Q2 and the six months ended
The Company's 2024 Net capital expenditure budget, including capital costs related to RSS licenses, is expected to be approximately
NON-GAAP MEASURES
ACT uses certain performance measures throughout this news release that are not defined under IFRS Accounting Standards or Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures do not have a standardized meaning and may differ from that of other organizations, and accordingly, may not be comparable. Investors should be cautioned that these measures should not be construed as alternatives to IFRS Accounting Standards measures as an indicator of ACT's performance.
These measures include the Adjusted gross margin, Adjusted gross margin %, Adjusted EBITDAS, Adjusted EBITDAS margin %, Adjusted EBITDAS per diluted share, Free cash flow, Working capital and Net capital expenditures. Management believes these measures provide supplemental financial information that is useful in the evaluation of ACT's operations.
These non-GAAP measures are defined as follows:
i) |
"Adjusted gross margin" - calculated as gross margin before non-cash costs (write-down of inventory, depreciation, amortization and share-based compensation); is considered a primary indicator of operating performance (see tabular calculation); |
|
|
ii) |
"Adjusted gross margin %" - calculated as Adjusted gross margin divided by revenues; is considered a primary indicator of operating performance (see tabular calculation); |
|
|
iii) |
"Adjusted EBITDAS" - calculated as net income before finance costs, unrealized foreign exchange on intercompany balances, income tax expense, depreciation, amortization, gain on settlement of lease liabilities, non-recurring costs, write-down of inventory and share-based compensation; provides supplemental information to net income that is useful in evaluating the results and financing of the Company's business activities before considering certain charges (see tabular calculation); |
|
|
iv) |
"Adjusted EBITDAS margin %" - calculated as Adjusted EBITDAS divided by revenues; provides supplemental information to net income that is useful in evaluating the results and financing of the Company's business activities before considering certain charges as a percentage of revenues (see tabular calculation); |
|
|
v) |
"Adjusted EBITDAS per basic and diluted share" - calculated as Adjusted EBITDAS divided by the basic and diluted weighted average common shares outstanding; provides supplemental information to net income that is useful in evaluating the results and financing of the Company's business activities before considering certain charges on a per basic and diluted common share basis; |
|
|
vi) |
"Free cash flow" - calculated as cash flow - operating activities prior to: i) changes in non-cash working capital, ii) income tax paid (refund) and iii) non-recurring costs less: i) PP&E and intangible asset additions, excluding assets acquired in business combinations, ii) required repayments on loans and borrowings, in accordance with the Company's credit facility agreement, and iii) repayments of lease liabilities, net of finance costs, offset by proceeds on disposal of PP&E. Management uses this measure as an indication of the Company's ability to generate funds from its operations to support future capital expenditures, additional repayments of loans and borrowings or other initiatives (see tabular calculation). |
|
|
|
The Company has deducted intangible asset additions from its Free cash flow calculation in 2024 Q1, compared to being excluded in prior periods. The change of the calculation is mainly due to more significant additions in the period as the Company expanded its RSS tool fleet and the related licenses, as well as expected cash outflows in the future related to intangible assets as the Company expands its technology offerings. In addition, there were reclassification adjustments related to the cash flow - operating activities, proceeds on disposal of PP&E and PP&E additions, as described in the "Reclassifications" section in this news release. |
|
|
vii) |
"Working capital" - calculated as current assets less current liabilities, excluding the current portion of loans and borrowings. Management uses this measure as an indication of the Company's financial and cash liquidity position. |
|
|
viii) |
"Net capital expenditures" - calculated as the gross capital expenditures less reimbursements from customers and insurance proceeds related to equipment lost-in-hole and damaged beyond repair, net of payments to vendors for insurance coverage and third-party rental equipment lost-in-hole or damaged beyond repair - refer to the "Capital expenditures" section of this news release. |
The following tables provide reconciliations from the IFRS Accounting Standards to non-GAAP measures.
Adjusted gross margin
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|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Gross margin (1) |
$ 27,184 |
$ 21,513 |
$ 62,682 |
$ 42,521 |
Add non-cash items included in cost of sales: |
|
|
|
|
Write-down of inventory included in cost of sales |
54 |
— |
61 |
378 |
Depreciation and amortization |
6,180 |
10,115 |
17,815 |
19,340 |
Share-based compensation |
169 |
96 |
392 |
240 |
Adjusted gross margin |
$ 33,587 |
$ 31,724 |
$ 80,950 |
$ 62,479 |
|
|
|
|
|
Adjusted gross margin % |
26 % |
26 % |
27 % |
25 % |
(1) |
Refer to the "Reclassifications" section in this news release. |
Adjusted EBITDAS
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|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Net income |
$ 5,259 |
$ 2,416 |
$ 16,840 |
$ 3,210 |
Add (deduct): |
|
|
|
|
Income tax expense |
1,148 |
2,176 |
2,813 |
2,583 |
Depreciation and amortization - cost of sales |
6,180 |
10,115 |
17,815 |
19,340 |
Depreciation and amortization - selling, general and administrative expenses |
2,462 |
1,499 |
4,809 |
3,008 |
Share-based compensation - cost of sales |
169 |
96 |
392 |
240 |
Share-based compensation - selling, general and administrative expenses |
719 |
674 |
1,649 |
1,449 |
Finance costs - loans and borrowings and exchangeable promissory notes |
2,419 |
1,486 |
4,884 |
3,216 |
Finance costs - lease liabilities |
201 |
205 |
406 |
419 |
Unrealized foreign exchange gain on intercompany balances |
(1,339) |
(910) |
(3,648) |
(899) |
Gain on settlement of lease liabilities |
(391) |
— |
(391) |
— |
Non-recurring expenses, including inventory write off |
478 |
465 |
485 |
843 |
Adjusted EBITDAS |
$ 17,305 |
$ 18,222 |
$ 46,054 |
$ 33,409 |
|
|
|
|
|
Adjusted EBITDAS margin % |
13 % |
15 % |
16 % |
13 % |
Free cash flow
|
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|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Cash flow - operating activities (1) |
$ 34,123 |
$ 16,407 |
$ 49,866 |
$ 44,267 |
Add (deduct): |
|
|
|
|
Income tax paid |
3,633 |
817 |
3,793 |
648 |
Changes in non-cash operating working capital (1) |
(20,282) |
1,617 |
(5,801) |
(9,987) |
Non-recurring expenses |
33 |
465 |
33 |
465 |
Proceeds on disposal of property, plant and equipment (1) |
1,533 |
369 |
1,533 |
663 |
Less: |
|
|
|
|
Property, plant and equipment and intangible asset additions(1)(2) |
(15,956) |
(10,065) |
(36,842) |
(22,609) |
Required repayments on loans and borrowings(3) |
(5,164) |
(3,727) |
(10,313) |
(7,455) |
Repayments of lease liabilities, net of finance costs |
(917) |
(914) |
(1,816) |
(1,849) |
Free cash flow (deficit) |
$ (2,997) |
$ 4,969 |
$ 453 |
$ 4,143 |
(1) |
Refer to the "Reclassifications" section in this news release. |
(2) |
Property, plant and equipment additions exclude any non-cash additions. |
(3) |
Required repayments on loans and borrowings in accordance with the credit facility agreement, which excludes discretionary debt repayments. |
FORWARD LOOKING STATEMENTS
This news release contains certain forward-looking statements and forward-looking information (collectively referred to herein as "forward-looking statements") within the meaning of applicable Canadian securities laws. All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this news release contains forward-looking statements relating to, among other things:
- Future commitments;
- The 2024 Net capital expenditure budget and financing thereof;
- The outlook for global energy demand remains constructive driven by general economic growth, the increasing energy requirements of emerging technology, and the continued growth and development of third world nations.
- Oil prices continue to trade in relatively healthy ranges despite concerns of a potential recession in
North America and increased geopolitical risk that threatens supply. - The multi-year shift by producers to lower leverage levels, capital discipline, and dedicated shareholder return strategies has translated to more consistent spending, directly correlating to more consistent levels of activity for oilfield service providers.
- Optimism related to the growing number of
U.S. and Canadian LNG export facilities, coming online in the next several years, provides a more positive backdrop for the longer term with the potential for increased demand and more buoyant pricing in the future. - ACT moves into the third quarter of 2024 with the strongest Q3 Canadian job count in its history.
- Recent increases in oil and natural gas takeaway capacity are driving year-over-year growth in underlying Western Canadian activity levels and ACT continues to outperform this baseline.
- In the
U.S. , there are early signs of the rig count bottoming with activity constrained by weak natural gas prices and recent activity related to customer consolidation. - While these headwinds are considered relatively short-term in nature, they are likely to negatively impact the pace of a potential rebound in rig counts on
U.S. land in the back half of the year and potentially into 2025. - With a continued increase in well complexity and a focus on increasing production per well, ACT is well positioned to use its leading technology to help its customers maximize efficiency, which will support more consistent job counts and revenue levels, relative to the market in the quarters to come.
- With an internal opportunity set to support growth, we believe that the Company has some compelling drivers to further expand its business versus a flat market environment for the majority of the industry over the next twelve to eighteen months.
- The name ACT honours the legacy and accomplishments of both
Altitude and Cathedral , while conveying a proactive energy and the spirit of innovation we bring into the future, as we focus on delivering high-performance solutions for our customers. - The Company's technology suite is particularly well-suited to drill wells that have a high multi-lateral count and the proliferation of this type of drilling in Canadian oil-related markets has helped support stronger and more consistent levels of activity.
- We believe that a focus on the high-performance RSS market has helped support consistent job counts versus a lower rig count environment for
U.S. land. We also believe that there is opportunity for growth in the portion of the market that demands RSS technology and have further invested in ourU.S. RSS fleet, expanding to twenty-one systems from the sixteen systems held at the end of 2023. - With a significant portion of our daily revenue dedicated to third-party rental expense, our single biggest opportunity for growth leading into 2025 is the deployment of our own Rime-supplied MWD systems for the
U.S. directional drilling market. - ACT remains on track to manufacture fifty MWD systems by the end of this year with deployment and utilization of the fleet hitting full capacity in the first half of 2025. With ten systems already deployed and operating in the market, we should begin to see a modest improvement in financial results against a weaker macro environment as we replace third-party rentals and progress on our MWD build-out through the back half of 2024.
- With a relatively modest capital investment, successful deployment of a sizable MWD fleet is our highest priority as it provides the highest potential returns on capital versus any other investment opportunity before us.
- Finally, our
U.S. -based Discovery Downhole Services mud motor rental business saw weaker utilization levels in 2024 Q2, which was roughly in-line with the declining trajectory of theU.S. land rig count. - We remain confident that the business will produce results that will allow us to further reduce our Loans and borrowings to very comfortable levels within the next twelve months, providing the Company with optionality to initiate a shareholder return strategy in the near future, if market conditions allow.
- Lower levels of debt combined with a meaningful reduction in third-party rental expense in 2025 will support higher levels of cash flow and profitability, providing further strategic flexibility into the future.
The Company believes the expectations reflected in such forward-looking statements are reasonable as of the date hereof but no assurance can be given that these expectations will prove to be correct and such forward-looking statements should not be unduly relied upon.
Various material factors and assumptions are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements. Those material factors and assumptions are based on information currently available to the Company, including information obtained from third-party industry analysts and other third-party sources. In some instances, material assumptions and material factors are presented elsewhere in this news release in connection with the forward-looking statements. You are cautioned that the following list of material factors and assumptions is not exhaustive. Specific material factors and assumptions include, but are not limited to:
- the performance of ACT's business;
- impact of economic and social trends;
- oil and natural gas commodity prices and production levels;
- capital expenditure programs and other expenditures by ACT and its customers;
- the ability of ACT to attract and retain key management personnel;
- the ability of ACT to retain and hire qualified personnel;
- the ability of ACT to obtain parts, consumables, equipment, technology, and supplies in a timely manner to carry out its activities;
- the ability of ACT to maintain good working relationships with key suppliers;
- the ability of ACT to retain customers, market its services successfully to existing and new customers and reliance on major customers;
- risks associated with technology development and intellectual property rights;
- obsolescence of ACT's equipment and/or technology;
- the ability of ACT to maintain safety performance;
- the ability of ACT to obtain adequate and timely financing on acceptable terms;
- the ability of ACT to comply with the terms and conditions of its credit facility;
- the ability to obtain sufficient insurance coverage to mitigate operational risks;
- currency exchange and interest rates;
- risks associated with future foreign operations;
- the ability of ACT to integrate its transactions and the benefits of any acquisitions, dispositions and business development efforts;
- environmental risks;
- business risks resulting from weather, disasters and related to information technology;
- changes under governmental regulatory regimes and tax, environmental, climate and other laws in
Canada and theU.S. ; and - competitive risks.
Forward-looking statements are not a guarantee of future performance and involve a number of risks and uncertainties some of which are described herein. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause the Company's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the risks identified in this news release and in the Company's Annual Information Form under the heading "Risk Factors". Any forward-looking statements are made as of the date hereof and, except as required by law, the Company assumes no obligation to publicly update or revise such statements to reflect new information, subsequent or otherwise.
All forward-looking statements contained in this news release are expressly qualified by this cautionary statement. Further information about the factors affecting forward-looking statements is available in the Company's current Annual Information Form that has been filed with Canadian provincial securities commissions and is available on www.sedarplus.ca and the Company's website (www.actenergy.com).
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at
Canadian dollars in '000s
(unaudited)
|
|
|
As at |
2024 |
2023 |
|
|
|
Assets |
|
|
Current assets: |
|
|
Cash |
$ 16,992 |
$ 10,731 |
Trade receivables |
104,513 |
111,846 |
Prepaid expenses |
4,313 |
5,839 |
Inventories |
47,504 |
44,976 |
Total current assets |
173,322 |
173,392 |
|
|
|
Property, plant and equipment |
125,936 |
113,853 |
Intangible assets |
70,402 |
66,366 |
Right-of-use assets |
9,411 |
10,138 |
|
41,300 |
39,984 |
Total non-current assets |
247,049 |
230,341 |
Total assets |
$ 420,371 |
$ 403,733 |
|
|
|
Liabilities and Shareholders' Equity |
|
|
Current liabilities: |
|
|
Trade and other payables |
$ 95,077 |
$ 93,661 |
Current taxes payable |
— |
1,425 |
Loans and borrowings, current |
21,182 |
21,023 |
Lease liabilities, current |
3,369 |
3,441 |
Total current liabilities |
119,628 |
119,550 |
|
|
|
Loans and borrowings, long-term |
51,501 |
57,575 |
Exchangeable promissory notes |
25,164 |
23,923 |
Lease liabilities, long-term |
10,977 |
12,323 |
Deferred tax liability |
12,406 |
10,894 |
Total non-current liabilities |
100,048 |
104,715 |
Total liabilities |
219,676 |
224,265 |
|
|
|
Shareholders' equity: |
|
|
Share capital |
199,006 |
197,380 |
|
(469) |
(709) |
Exchangeable promissory notes |
1,242 |
1,242 |
Contributed surplus |
17,388 |
17,002 |
Accumulated other comprehensive income |
15,281 |
13,088 |
Deficit |
(31,753) |
(48,535) |
Total shareholders' equity |
200,695 |
179,468 |
Total liabilities and shareholders' equity |
$ 420,371 |
$ 403,733 |
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Three and six months ended
Canadian dollars in '000s except per share amounts
(unaudited)
|
Three months ended |
Six months ended |
||
|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Revenues (1) |
$ 130,297 |
$ 121,339 |
$ 295,253 |
$ 254,287 |
Cost of sales: |
|
|
|
|
Direct costs (1) |
(96,764) |
(89,615) |
(214,364) |
(192,186) |
Depreciation and amortization |
(6,180) |
(10,115) |
(17,815) |
(19,340) |
Share-based compensation |
(169) |
(96) |
(392) |
(240) |
Total cost of sales |
(103,113) |
(99,826) |
(232,571) |
(211,766) |
|
|
|
|
|
Gross margin |
27,184 |
21,513 |
62,682 |
42,521 |
|
|
|
|
|
Selling, general and administrative expenses: |
|
|
|
|
Direct costs |
(14,808) |
(12,004) |
(30,834) |
(26,090) |
Depreciation and amortization |
(2,462) |
(1,499) |
(4,809) |
(3,008) |
Share-based compensation |
(719) |
(674) |
(1,649) |
(1,449) |
Total selling, general and administrative expenses |
(17,989) |
(14,177) |
(37,292) |
(30,547) |
Research and development costs |
(1,029) |
(458) |
(1,640) |
(1,010) |
Write-off of property, plant and equipment (1) |
(613) |
(745) |
(2,248) |
(1,721) |
Gain (loss) on disposal of property, plant and equipment (1) |
20 |
(339) |
20 |
(263) |
Gain on settlement of lease liabilities |
391 |
— |
391 |
— |
Income from operating activities |
7,964 |
5,794 |
21,913 |
8,980 |
|
|
|
|
|
Finance costs - loans and borrowings and exchangeable promissory notes |
(2,419) |
(1,486) |
(4,884) |
(3,216) |
Finance costs - lease liabilities |
(201) |
(205) |
(406) |
(419) |
Foreign exchange gain |
1,063 |
954 |
3,030 |
913 |
Acquisition and restructuring costs |
— |
(465) |
— |
(465) |
Income before income taxes |
6,407 |
4,592 |
19,653 |
5,793 |
|
|
|
|
|
Income tax expenses: |
|
|
|
|
Current |
(202) |
(525) |
(1,655) |
(561) |
Deferred |
(946) |
(1,651) |
(1,158) |
(2,022) |
Income tax expenses |
(1,148) |
(2,176) |
(2,813) |
(2,583) |
|
|
|
|
|
Net income |
5,259 |
2,416 |
16,840 |
3,210 |
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
Foreign currency translation differences on foreign operations |
738 |
(3,826) |
2,193 |
(4,251) |
Total comprehensive income (loss) |
$ 5,997 |
$ (1,410) |
$ 19,033 |
$ (1,041) |
|
|
|
|
|
Net income per share - basic (2) |
$ 0.15 |
$ 0.07 |
$ 0.49 |
$ 0.10 |
Net income per share - diluted (2) |
$ 0.14 |
$ 0.07 |
$ 0.44 |
$ 0.09 |
(1) |
Refer to the "Reclassifications" section of this news release. |
(2) |
Restated to reflect the 7:1 share consolidation on |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended
Canadian dollars in '000s
(unaudited)
|
Share capital |
shares |
Contributed surplus |
Accumulated other comprehensive income |
Deficit |
Total shareholders' equity |
|
|
|
|
|
|
|
Balance, |
$ 180,484 |
$ (959) |
$ 15,854 |
$ 17,389 |
$ (58,871) |
$ 153,897 |
Comprehensive (loss) income |
— |
— |
— |
(4,251) |
3,210 |
(1,041) |
Contributed surplus on treasury shares vested |
— |
250 |
(250) |
— |
— |
— |
Issued pursuant to warrant exercises |
18,186 |
— |
(2,976) |
— |
— |
15,210 |
Issued pursuant to stock options exercised |
253 |
— |
(94) |
— |
— |
159 |
Share-based compensation |
— |
— |
1,689 |
— |
— |
1,689 |
Balance, |
$ 198,923 |
$ (709) |
$ 14,223 |
$ 13,138 |
$ (55,661) |
$ 169,914 |
|
Share capital |
shares |
Exchangeable |
Contributed surplus |
Accumulated other comprehensive income |
Deficit |
Total shareholders' equity |
|
|
|
|
|
|
|
|
Balance, |
|
$ (709) |
$ 1,242 |
$ 17,002 |
$ 13,088 |
$ (48,535) |
$ 179,468 |
Comprehensive income |
— |
— |
— |
— |
2,193 |
16,840 |
19,033 |
Repurchased pursuant to normal course issuer bid |
(2,019) |
— |
— |
— |
— |
(58) |
(2,077) |
Contributed surplus on treasury shares vested |
— |
240 |
— |
(240) |
— |
— |
— |
Issued pursuant to stock options exercised |
3,645 |
— |
— |
(1,415) |
— |
— |
2,230 |
Share-based |
— |
— |
— |
2,041 |
— |
— |
2,041 |
Balance, |
|
$ (469) |
$ 1,242 |
$ 17,388 |
$ 15,281 |
$ (31,753) |
$ 200,695 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended
Canadian dollars in '000s
(unaudited)
|
Three months ended |
Six months ended |
||
|
2024 |
2023 |
2024 |
2023 |
|
|
|
|
|
Cash provided by (used in): |
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
Net income |
$ 5,259 |
$ 2,416 |
$ 16,840 |
$ 3,210 |
Non-cash adjustments: |
|
|
|
|
Income tax expenses |
1,148 |
2,176 |
2,813 |
2,583 |
Depreciation and amortization |
8,642 |
11,614 |
22,624 |
22,348 |
Share-based compensation |
888 |
770 |
2,041 |
1,689 |
Write-off of property, plant and equipment (1) |
613 |
745 |
2,248 |
1,721 |
(Gain) loss on disposal of property, plant and equipment (1) |
(20) |
339 |
(20) |
263 |
Gain on settlement of lease liabilities |
(391) |
— |
(391) |
— |
Write-down of inventory included in cost of sales |
54 |
— |
61 |
378 |
Finance costs - loans and borrowings and exchangeable promissory notes |
2,419 |
1,486 |
4,884 |
3,216 |
Finance costs - lease liabilities |
201 |
205 |
406 |
419 |
Income tax paid |
(3,633) |
(817) |
(3,793) |
(648) |
Unrealized foreign exchange loss on intercompany balances |
(1,339) |
(910) |
(3,648) |
(899) |
|
13,841 |
18,024 |
44,065 |
34,280 |
Changes in non-cash operating working capital |
20,282 |
(1,617) |
5,801 |
9,987 |
Cash flow - operating activities |
34,123 |
16,407 |
49,866 |
44,267 |
|
|
|
|
|
Investing activities: |
|
|
|
|
Property, plant and equipment additions (1) |
(14,064) |
(10,043) |
(29,983) |
(22,465) |
Intangible asset additions |
(1,892) |
(22) |
(6,859) |
(144) |
Proceeds on disposal of property, plant and equipment |
1,533 |
369 |
1,533 |
663 |
Changes in non-cash investing working capital |
1,231 |
174 |
3,989 |
(1,755) |
Cash flow - investing activities |
(13,192) |
(9,522) |
(31,320) |
(23,701) |
|
|
|
|
|
Financing activities: |
|
|
|
|
Advances of loans and borrowings, net of upfront financing fees |
— |
— |
10,000 |
— |
Repayments on loans and borrowings |
(10,159) |
(16,727) |
(16,868) |
(20,455) |
Payments on lease liabilities, net of finance costs |
(917) |
(914) |
(1,816) |
(1,849) |
Interest paid |
(2,316) |
(1,691) |
(4,689) |
(3,635) |
Common shares repurchased pursuant to normal course issuer bid |
— |
— |
(2,077) |
— |
Proceeds on common share and warrant issuances, net of issuance costs |
2,007 |
14,479 |
2,230 |
15,367 |
Cash flow - financing activities |
(11,385) |
(4,853) |
(13,220) |
(10,572) |
Effect of exchange rate on changes on cash (1) |
481 |
(997) |
935 |
(1,046) |
Change in cash |
10,027 |
1,035 |
6,261 |
8,948 |
Cash, beginning of period |
6,965 |
19,088 |
10,731 |
11,175 |
Cash, end of period |
$ 16,992 |
$ 20,123 |
$ 16,992 |
$ 20,123 |
(1) |
Refer to the "Reclassifications" section of this news release |
ACT Energy Technologies Ltd., based in
ACT is a trusted partner to North American energy companies requiring high performance directional drilling services and related downhole technologies. We work in partnership with our customers to tailor our equipment and expertise to meet their specific geographical and technical needs. Our experience, technologies and responsive personnel enable our customers to achieve higher efficiencies and lower project costs. For more information, visit www. act energy .com .
SOURCE