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Xtreme Drilling and Coil Services Announces Second Quarter 2013 Operating and Financial Results and Election of New Board Member

CALGARY, ALBERTA -- (Marketwired) -- 08/02/13 -- Xtreme Drilling and Coil Services ("Xtreme" or the "Company") (TSX:XDC) announces summary results for the three and six months ended June 30, 2013. It is anticipated that filing will take place on SEDAR of the Condensed Interim Consolidated Financial Statements and Management's Discussion and Analysis on Friday, August 2, 2013.

Highlights - Q2 2013


--  Adjusted EBITDA was $16.8 million for the second quarter. This was a
    decrease of 12% over the previous quarter and an increase of 119% over
    the second quarter of 2012. The decrease in adjusted EBITDA in the
    quarter was due to Canadian seasonality and extremely wet weather in
    North Dakota which resulted in a higher number of stand-by and moving
    days than the first quarter. The decrease was mitigated by US XSR which
    had higher utilization and an increase in operating margin. 
    
--  Revenue was $53.2 million in the second quarter of 2013 or a decrease of
    2% over the previous quarter. The decrease in revenue for the quarter
    was a function of fewer operating days. Revenue per operating day was
    essentially flat at approximately $27,900. 
    
--  The Company had 1,911 operating days, or 38 fewer days, in the second
    quarter of 2013, than the first quarter of 2013. This resulted in a
    utilization rate of 78% for the fleet of 21 XDR drilling rigs and 7 XSR
    coiled tubing units.
    
    The drilling segment achieved utilization of 85% on 1,621 operating
    days. This is comprised of a 92% utilization rate in the US XDR fleet
    and 41% for the Canadian XDR rigs. For the quarter, the coil services
    segment achieved utilization of 53% on 290 operating days. This is
    comprised of a 99% utilization rate on the two XSR units in Saudi Arabia
    and a 30% utilization rate on the four available XSR units in the US. In
    the US only two units were actively marketed until the company deployed
    a third XSR unit during the last week of June. The utilization on the
    two active XSR rigs was 60% for the quarter. The fourth XSR unit is
    anticipated to be deployed later in 2013. 
    
--  Net Income of $0.2 million, less amount attributable to non-controlling
    interest of $0.3 million, for net loss attributable to the owners of the
    parent of $0.1 million for the second quarter of 2013, or $.00 per fully
    diluted share. This is net of a foreign exchange loss of $3.3 million
    during the quarter. Excluding this charge net income, would have been
    approximately $3.5 million or $.04 per share. 
    
--  The Company paid the remaining $5 million on the HSBC demand note during
    the quarter and paid down an additional $6.4 million of the operating
    line of credit, part of the Company's $150 million revolving line of
    credit. Net debt at quarter end was $128 million in Canadian Dollars
    ($121.7 million in USD) which is inclusive of $4.0 million in debt held
    in the Saudi Arabian joint venture. At quarter end all of the Company's
    debt was denominated in US dollars and translated for financial
    reporting purposes to Canadian Dollars. Xtreme exited the quarter with
    working capital of $30 million and a funded debt to EBITDA ratio of
    2.16, which is well under the credit facility covenant level of 3.00.
    Capital expenditures totaled $9.1 million for the second quarter. 
    
--  The Company received extensions on the two XSR units operating in Saudi
    Arabia for a two month period, with a two month renewal option, until
    such time as the pending long term contract is finalized. It is expected
    that the new contract will be completed and executed within the next 30
    days. However, the increase in rates has been accepted by the customer
    and went into effect on July 28, 2013. In addition, the Company is
    currently in discussions to purchase the remaining 20% interest in the
    Saudi Arabian joint venture. 

Election of a New Board Member

Shareholders approved the appointment of Mr. James Renfroe Jr. as the seventh member of the Board of Directors at the Special Meeting of Shareholders held on August 2, 2013. Of the 33,399,711 votes represented at the Special Meeting, Mr. Renfroe received 32,875,745 votes for (98.43%) and 523,966 votes withheld (1.57%). Mr. Renfroe is an independent businessman, and currently a non-executive Director of Expro Group, an international oilfield service company. Mr. Renfroe was previously the Senior Strategic Advisor to the CEO of GE Oil and Gas. Prior to that Mr. Renfroe was Executive Director and CEO of the Well Support Division of Wood Group, PLC, a multinational oil and gas services company. Mr. Renfroe has an extensive background in executive leadership, strategic planning, operations and business development having worked for Halliburton Company in various executive positions from 1974 to 2007. While working for Halliburton, Mr. Renfroe managed multiple product lines (globally) and participated in a number of structural changes and process improvements to enhance organizational effectiveness. He led acquisitions and divestitures, as well as strategy development.


Selected Quarterly Financial Information (unaudited)                        
                                                                            
                                        Jun 30,  Mar 31,  Dec 31,   Sep 30, 
Three months ended                         2013     2013     2012      2012 
----------------------------------------------------------------------------
Revenue                                  53,268   54,182   51,852    48,910 
Adjusted EBITDA (1)                      16,847   19,234   15,432    10,655 
Adjusted EBITDA as a percentage of                                          
 Revenue                                     32       35       30        22 
Adjusted EBITDA per share (1) - basic                                       
 ($)                                       0.21     0.24     0.19      0.16 
Net income (loss)                           218    4,343    4,888    (3,457)
Net income (loss) per share - basic ($)    0.00     0.05     0.06     (0.06)
Capital assets                          431,294  417,431  415,354   425,364 
Total assets                            520,326  508,823  506,551   511,279 
Net debt (2)                            127,977  130,014  141,841   119,759 
----------------------------------------------------------------------------
Operating days                            1,911    1,949    1,891     1,742 
Utilization (percentage) - XDR               85       89       85        86 
Utilization (percentage)- XSR                53       49       47        36 
Utilization (percentage) - Total             78       80       77        74 
Weighted average rigs in service           28.0     28.0     26.8      26.0 
Total rigs, end of quarter                   28       28       28        28 
----------------------------------------------------------------------------
                                                                            
                                        Jun 30,  Mar 31,  Dec 31,   Sep 30, 
                                           2012     2012     2011      2011 
----------------------------------------------------------------------------
Revenue                                  40,180   38,446   32,552    26,659 
Adjusted EBITDA (1)                       7,695    7,908    6,433     6,017 
Adjusted EBITDA as a percentage of                                          
 Revenue                                     19       21       20        23 
Adjusted EBITDA per share (1) - basic                                       
 ($)                                       0.12     0.12     0.10      0.09 
Net (loss) income                        (2,193)   1,207   (1,025)     (305)
Net (loss) income per share - basic ($)   (0.03)    0.02    (0.02)    (0.00)
Capital assets                          425,397  379,710  348,148   308,465 
Total assets                            512,254  464,453  424,921   385,405 
Net debt (2)                            144,039  109,546   75,563    35,102 
----------------------------------------------------------------------------
Operating days                            1,494    1,423    1,246     1,137 
Utilization (percentage) - XDR               74       84       73        69 
Utilization (percentage)- XSR                57       56       97       100 
Utilization (percentage) - Total             70       79       75        73 
Weighted average rigs in service           23.4     19.8     18.0      17.0 
Total rigs, end of quarter                   27       18       18        17 
----------------------------------------------------------------------------
                                                                            
1   Adjusted EBITDA. See Reconciliation of adjusted EBITDA below            
2   Total debt less cash                                                    

Excerpt from Management's Discussion and Analysis

For the three and six months ended June 30, 2013

Outlook

During the second quarter of 2013 the Company continued to focus on improving financial and operating performance. Utilization in the US XDR drilling fleet remained strong at 92%. It is anticipated that the only idle US rig will begin work by the end of August. This should increase the utilization for the US drilling fleet in the third quarter. Along with this we anticipate slightly higher repair and maintenance expenses in the third quarter related to preparing the rig for work. The core US drilling markets of the Bakken and greater DJ Basin remain active as rig counts have increased by 12% and 27% respectively in 2013. We have a number of contracts coming up for renewal in late 2013 and early 2014 but due to the fact that our entire US drilling fleet is operating in these two active markets we are confident in our ability to roll or reposition our expiring contracts. Currently, two of the three XDR rigs that were up for renewal in the third quarter have been extended into early 2014. As new budgets are approved at year end we are optimistic that these rigs will be re-contracted beyond their current term.

In Canada the three XDR rigs that operated in the second quarter had a 41% utilization rate which was significantly higher than the CAODC industry average of 18%. The Canadian market continues to face head winds and as such we anticipate that utilization in our Canadian XDR division will be in the 70-75% range over the second half of the year. Margins remain under pressure based on lower day rates. During the second quarter revenue per operating day was down by 30%. We anticipate it will bounce back in the second half of the year but below 2012 levels.

The US XSR business had an increase in utilization and operating margin during the second quarter. The division set new records for reach with 2 5/8 inch coiled tubing in the Eagle Ford by completing wells with horizontals in excess of 10,400 feet with total measured depth of 20,400 feet. We have now demonstrated that with Xtreme technology customers can make it to the toe of the longest reach laterals that are being drilled in the Eagle Ford. Due to this we have begun to clearly differentiate our service offerings from commoditized 2 inch coiled tubing competitors. We are excited about the market and potential to put our fourth unit to work in later in 2013.

The Saudi XSR business maintained strong utilization and margins during the second quarter. The current contract, which was a two year contracts with a 1 year renewal, finished up after quarter end with impressive operational performance for the customer. With that, the units were extended for two months while the longer term extensions are finalized. A new rate structure became effective with the recent renewals and is expected to increase operating margins. Management is currently pursuing new opportunities in the region.

In the second half of 2013 management will continue to focus on de-leveraging the balance sheet and maximizing operating performance and cash flow. This should provide Xtreme the flexibility to pursue opportunities in the ultra-deep long reach re-entry and completion market with our leading edge patented coil tubing technology in 2014.

Conference Call Details

Xtreme has scheduled a conference call on Tuesday, August 6, 2013, beginning promptly at 10:00 am MDT (11:00 am CDT; 12:00 am EDT) to discuss the 2013 second quarter financial and operating results. Tom Wood, Chief Executive Officer, will host the conference call with participation from Matt Porter, Chief Financial Officer.

Conference operator dial-in numbers

To participate in the conference call, please dial in as follows approximately ten minutes before the start time in your time zone.

+1 800-766-6630 (North America Toll-Free) or +1 416-695-6622 (Alternate)

An audio replay of the call will be available until Tuesday, August 13, 2013. To access the replay, call +1 800-408-3053 or +1 905-694-9451 and enter pass code 4828220.

Reader Advisory

This news release, or documents incorporated herein, contains forward-looking statements ("FLS"). More particularly, this news release contains statements that may relate to contracting, marketing, financing, construction, modifications, deployment, operation, utilization of drilling rigs in the Company's current and future fleet, and any potential outcome relating to claims and litigation. Further, the FLS herein may relate to trade credit insurance carried by the Company to mitigate receivables collection risk. Although Xtreme believes expectations reflected in these FLS are reasonable, readers should not place undue reliance on them because Xtreme can give no assurance they will prove to be correct. There are many factors that could cause FLS not to be correct, including risks and uncertainties inherent in the Company's business.

These statements are based on certain factors and assumptions including, but not limited to: the assessment of current and projected future operations; ongoing and future strategic business alliances, negotiations and opportunities to enter new, extend or complete existing contracts; the availability and cost of financing; foreign currency exchange rates; timing and magnitude of capital expenditures; expenses and other variables affecting rig operation, modification and construction; the ability and commitment of vendors to provide rig component equipment, services and supplies, including labor, in a cost-effective and timely manner; the issuance of applied-for patents; changes in tax rates; and government regulations. Although Xtreme considers the assumptions used to prepare this news release reasonable, based on information available to management as of August 2, 2013, ultimately the assumptions may prove to be incorrect.

Forward-looking statements are also subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from management's current expectations. These factors include, but are not limited to: the cyclical nature of drilling market demand, foreign currency exchange rates, and commodity prices; access to credit and to equity markets; the availability of qualified personnel; vendor-provided rig components; and, competition for customers.

Management's assumptions considered the following: compliance with the terms of the Company's current and proposed new credit facility; ongoing access to key supplies and components required to continue operating and maintaining equipment, including fuel; continued successful performance of drilling and related equipment; expectations regarding gross margin; recruitment and retention of qualified personnel; continuation or extension of existing long-term or multi-well contracts; revenue expectations related to shorter-term drilling opportunities; willingness and ability of customers to remit amounts owing to Xtreme in accordance with normal industry practices; and management of accounts receivable in direct relation to revenue generation.

Financial outlook information contained in this news release about prospective results of operations, financial position or cash provided by operating activities is based on assumptions about future events, including economic conditions and proposed courses of action, and on management's assessment of relevant information currently available. Readers are cautioned such financial outlook information contained in this news release is not appropriate for purposes other than for which it is disclosed here. Readers should not place undue importance on FLS and should not rely on this information as of any other date. Except as required pursuant to applicable securities laws, Xtreme disclaims any intention, and assumes no obligation, to update publicly or revise FLS to reflect actual results, whether as a result of new information, future events, changes in assumptions, changes in factors affecting such FLS or otherwise.

About Xtreme Drilling and Coil Services

Xtreme Drilling and Coil Services Corp. ("XDC" on the Toronto Stock Exchange) designs, builds, and operates a fleet of high specification drilling rigs and coiled tubing well service units featuring leading-edge proprietary technology including AC high capacity coil injectors, deep re-entry drilling capability, modular transportation systems and continuous integration of in-house advances in methodologies.

Currently Xtreme operates two service lines: Drilling Services and Coil Services under contracts with oil and natural gas exploration and production companies and integrated oilfield service providers in Canada, the United States and Saudi Arabia. For more information about the Company, please visit www.xtremecoil.com.


Xtreme Drilling and Coil Services Corp.                                     
Condensed Interim Consolidated Statements of Financial Position             
(in thousands of Canadian dollars)                                          
(unaudited)                                                                 
                                                                            
                                     Jun 30, 2013 Dec 31, 2012  Jan 1, 2012 
                                     ---------------------------------------
                                     ---------------------------------------
Assets                                                                      
Current assets                                                              
  Cash and cash equivalents                 8,979        5,921        6,873 
  Accounts receivable                      49,193       44,878       46,653 
  Other receivables                         4,403        2,975        1,636 
  Prepaid expenses and other                1,462        2,047        2,114 
  Assets held for sale                          -        9,308            - 
  Income tax recoverable                      369          368          928 
  Inventory                                 8,273        6,474        6,470 
                                     ---------------------------------------
                                           72,679       71,971       64,674 
Non-current assets                                                          
Deferred tax asset                         12,285       15,006        7,576 
Property and equipment                    431,294      415,354      348,148 
Intangible assets                           4,068        4,220        4,523 
                                     ---------------------------------------
Total Assets                              520,326      506,551      424,921 
                                     ---------------------------------------
                                     ---------------------------------------
                                                                            
Liabilities and Equity                                                      
Current liabilities                                                         
  Bank indebtedness                             -        7,834            - 
  Accounts payable and accrued                                              
   liabilities                             25,425       27,904       26,902 
  Current portion of long-term debt        17,299       14,201          500 
                                     ---------------------------------------
                                           42,724       49,939       27,402 
Long-term liabilities                                                       
Long-term debt                            119,657      125,727       81,936 
                                     ---------------------------------------
Total Liabilities                         162,381      175,666      109,338 
                                     ---------------------------------------
                                                                            
Equity attributable to owners of the                                        
 parent                                                                     
Share capital                             327,184      327,197      310,296 
Share option reserve                       12,002       11,572       10,338 
Accumulated deficit                        (1,510)      (5,312)      (4,325)
Foreign currency translation reserve       10,237      (11,314)      (8,209)
                                     ---------------------------------------
                                          347,913      322,143      308,100 
                                                                            
Non-controlling interest                   10,032        8,742        7,483 
                                     ---------------------------------------
                                          357,945      330,885      315,583 
                                     ---------------------------------------
                                                                            
Total Liabilities and Equity              520,326      506,551      424,921 
                                     ---------------------------------------
                                     ---------------------------------------
                                                                            
                                                                            
Xtreme Drilling and Coil Services Corp.                                     
Condensed Interim Consolidated Statements of Income                         
For the three and six months ended June 30, 2013 and 2012                   
(in thousands of Canadian dollars, except share and per share data)         
(unaudited)                                                                 
                                                                            
                               Three months ended       Six months ended    
                            ------------------------------------------------
                            ------------------------------------------------
                               June 30,    June 30,    June 30,    June 30, 
                                   2013        2012        2013        2012 
                            ------------------------------------------------
Revenue                          53,268      40,180     107,450      78,626 
                                                                            
Expenses                                                                    
Operating expenses               33,560      29,592      65,957      56,927 
General and administrative                                                  
 expenses                         2,861       2,893       5,412       6,096 
Depreciation of property and                                                
 equipment                        9,098       5,632      17,641      10,599 
Amortization of intangibles          76          76         152         152 
Stock-based compensation            210         522         430       1,031 
Foreign exchange loss             3,272       1,986       5,145         377 
(Loss) gain on sale of                                                      
 equipment                         (117)         (3)         31           8 
Other expenses                       21          45          57          87 
Interest expense                  1,664       1,517       3,783       2,998 
                            ------------------------------------------------
                            ------------------------------------------------
Income (loss) before tax for                                                
 the period                       2,623      (2,080)      8,842         351 
                                                                            
Tax expense (recovery)                                                      
Current                             884         939       1,540       1,429 
Deferred                          1,521        (826)      2,741         (93)
                            ------------------------------------------------
                            ------------------------------------------------
Total tax expense                 2,405         113       4,281       1,336 
                                                                            
Net income (loss) for the                                                   
 period                             218      (2,193)      4,561        (985)
                            ------------------------------------------------
                            ------------------------------------------------
                                                                            
Net income (loss)                                                           
 attributable to                                                            
  Owners of the parent             (104)     (2,606)      3,802      (1,664)
  Non-controlling interest          322         413         759         679 
                            ------------------------------------------------
                                    218      (2,193)      4,561        (985)
                            ------------------------------------------------
                            ------------------------------------------------
                                                                            
                                                                            
Net income (loss) per common                                                
 share attributable to                                                      
 equity owners of the parent                                                
- basic                            0.00       (0.04)       0.05       (0.03)
- diluted                          0.00       (0.04)       0.05       (0.03)
                                                                            
Weighted average number of                                                  
 common shares                                                              
- basic                      80,790,315  65,781,642  80,790,315  65,742,278 
- diluted                    81,200,643  65,910,670  81,098,340  65,918,381 
                                                                            
                                                                            
Xtreme Drilling and Coil Services Corp.                                     
Reconciliation of Adjusted EBITDA                                           
For the three and six months ended June 30, 2013 and 2012                   
(in thousands of Canadian dollars, except per share data)                   
(unaudited)                                                                 
                                                                            
                                       Three months ended  Six months ended 
                                        Jun 30,   Jun 30,  Jun 30,  Jun 30, 
                                           2013      2012     2013     2012 
----------------------------------------------------------------------------
Net income (loss)                           218    (2,193)   4,561     (985)
Tax expense                               2,405       113    4,281    1,336 
Interest expense                          1,664     1,517    3,783    2,998 
(Gain) loss on sale of equipment           (117)       (3)      31        8 
Other expense                                21        45       57       87 
Foreign exchange loss                     3,272     1,986    5,145      377 
Stock-based compensation                    210       522      430    1,031 
Amortization of intangibles                  76        76      152      152 
Depreciation of property and equipment    9,098     5,632   17,641   10,599 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA                          16,847     7,695   36,081   15,603 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA per share ($)              0.21      0.12     0.45     0.24 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                                                            
Adjusted EBITDA attributable to:                                            
  Owners of the parent                   16,283     7,169   34,910   14,704 
  Non-controlling interest                  564       526    1,171      899 
----------------------------------------------------------------------------
                                         16,847     7,695   36,081   15,603 
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Contacts:
Xtreme Drilling and Coil Services Corp.
Matt Porter
Chief Financial Officer
+1 281 994 4604

Xtreme Drilling and Coil Services Corp.
16285 Park Ten Place, Suite 650
Houston, TX 77084
ir@xtremecoil.com
www.xtremecoil.com

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