Mr. Colin Dease reports

AKITA ANNOUNCES SECOND QUARTER RESULTS AND NET INCOME OF $6.2 MILLION FOR THE QUARTER

Akita Drilling Ltd. has released its results for the six months ended June 30, 2023.

The company's net income increased to $6,177,000 in the second quarter of 2023 from a loss of $4,252,000 during the same period of 2022. This is the second most profitable second quarter in the company's history (2006 -- $7,548,000). Higher day rates drove the improved earnings as activity levels remained constant between the two quarters (1,561 operating days in the second quarter of 2023, versus 1,562 in the same period of 2022). Adjusted funds flow from operations increased 168 per cent to $12.62-million in the second quarter of 2023, the highest second quarter funds flow in the company's history, from $4,715,000 in the same period of 2022, also driven by improved rates. Net cash from operations increased to $16.15-million for the three months ended June 30, 2023, compared with $6,189,000 in the same period of 2022, due to stronger results in the quarter and a working capital inflow. Debt decreased to $79.67-million at the end of the second quarter of 2023 from $94,601,000 at the same time in 2022. In Canada, the company operated nine rigs in the second quarter of 2023 (Q2 2022 -- 10 rigs) and 14 rigs in the United States (Q2 2022 -- 13 rigs). The company spent $4.7-million on routine capital items in the second quarter of 2023, up from $3,633,000 over the same period in 2022.

Colin Dease, Akita's chief executive officer, stated: "The strength of Akita's U.S. operations is clear to see in our record second quarter results, which have accelerated our debt repayment schedule, putting us well on track to achieving our $20-million repayment target for 2023, having already paid back $14-million in the first half of the year."

During the second quarter of 2023, Akita's adjusted operating margin fell slightly to $3,664,000, compared with $3,907,000 in the same quarter of 2022. Activity was the key driver for this decrease as the wildfires in Alberta forced two rigs to shut down, which reduced the number of operating days in the quarter to 471, compared with 569 in the second quarter of 2022. Akita's utilization over the second quarter of 2023 was 26 per cent, compared with the industry average utilization of 25 per cent over the same period. The high percentage of pad drilling rigs in Akita's Canadian fleet is advantageous in keeping rigs working over breakup, however, in the second quarter of 2023, wildfires and other environmental factors delayed rigs that were expected to work over breakup, mitigating this advantage.

Adjusted revenue in Canada increased to $17,687,000 in the second quarter of 2023 from $15,855,000 in the second quarter of 2022 despite fewer operating days. The day rate increases that were achieved in the second half of 2022 increased adjusted revenue per operating day to $37,552 in the second quarter of 2023, from $27,865 in the same period of 2022. These rate increases were reflected in all of the company's rig categories.

Higher revenue in the quarter was offset by higher adjusted operating and maintenance expenses, which increased to $14,023,000 in the second quarter of 2023 from $11,948,000 in the same period of 2022. This increase is attributable to an increase in both labour costs, which is the largest operating cost on a rig, and maintenance costs, which increased due to general price increases as well as costs incurred for work starting in the third quarter.

The impact of the U.S. day rate increases, which began to take effect in the second half of 2022, is clear to see when comparing adjusted revenue of $44,144,000 in the second quarter of 2023, with adjusted revenue of $28,487,000 over the same period of 2022, a 55-per-cent increase, despite activity levels increasing just 10 per cent over the same period. Quarter-over-quarter revenue per day has increased 41 per cent from the second quarter of 2022 to the second quarter of 2023, with the significant increases occurring in the third and fourth quarters of 2022, and to a lesser extent, in the first quarter of 2023.

Activity increased 97 days in the second quarter of 2023 (1,090) from the second quarter of 2022 (933), as all 14 of the company's currently marketed rigs worked in the quarter, compared with 13 working during the same period of 2022.

Adjusted operating and maintenance costs increased 29 per cent between the second quarter of 2023 and 2022, driven by increased costs per day, which increased to $26,757 in the second quarter of 2023 from $22,753 in the second quarter of 2022. The primary driver of the cost per day increase is increased labour costs. Operating and maintenance costs were offset in the second quarter of 2023 by the company's final $2-million in employee retention credits received from the IRS (Internal Revenue Service) in the quarter.

Further information

This news release shall be used as preparation for reading the full disclosure documents. Akita's unaudited interim condensed consolidated financial statements and management's discussion and analysis for the quarter ended June 30 2023, will be available on the Akita website or via SEDAR, or can be requested in print from the company.

Non-GAAP (generally accepted accounting principles) and supplementary financial measures

Adjusted revenue and adjusted operating and maintenance expenses

Revenue and operating and maintenance expenses in Akita's Canadian operating segment include revenue and expenses from Akita's wholly owned drilling rigs, as well as its share of joint venture revenue and expenses.

Excluded from the revenue and expenses in Akita's Canadian and U.S. operating segment are flow-through charges that are billed to operators and repaid to the company. The volume and timing of the flow-through charges can artificially impact the operational per day analysis and as a result management and certain investors may find the comparability between periods is improved when these flow through charges are excluded from revenue per day and operating and maintenance expense per day. The flow-through charges do not have any impact on the company's net earnings as the amounts offset each other.

Adjusted funds flow from operations

Adjusted funds flow from operations is not a recognized GAAP measure under IFRS (international financial reporting standards) and readers should note that Akita's method of determining adjusted funds flow from operations may differ from methods used by other companies, and includes cash flow from operating activities before working capital changes, equity income from joint ventures, and income tax amounts paid or recovered during the period. Nonetheless, management and certain investors may find adjusted funds flow from operations to be a useful measurement to evaluate the company's operating results at year-end and within each year, since the seasonal nature of the business affects the comparability of non-cash working capital changes both between and within periods.

Non-GAAP ratios

Adjusted funds flow from operations per share is calculated on the same basis as net loss per Class A and Class B share, basic and diluted, utilizing the basic and diluted weighted average number of Class A and Class B shares outstanding during the periods presented.

Adjusted revenue per operating day may be useful to analysts, investors, other interested parties and management as a measure of pricing strength, and is calculated by dividing adjusted revenue by the number of operating days for the period.

Adjusted operating and maintenance expenses per operating day may be useful to analysts, investors, other interested parties and management as it demonstrates a degree of cost control and provides a proxy for specific inflation rates incurred by the company.

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