Mr. Colin Dease reports

AKITA ANNOUNCES 2023 ANNUAL RESULTS WITH NET INCOME OF $18.4 MILLION AND REPAYMENT OF $24 MILLION IN DEBT

Akita Drilling Ltd. had net earnings of $18,415,000 for the year ended Dec. 31, 2023, compared with $4,288,000 in 2022, an increase of 329 per cent year over year and a return to a positive retained earnings balance. Significantly improved earnings translated into a 31-per-cent increase in adjusted funds flow from operations, which increased to $45,522,000 in 2023, from $34,813,000 in 2022. Both net income and adjusted funds flow from operations were the highest achieved since 2014. Despite improved financial results, activity was down year over year, with the Canadian division achieving 2,239 operating days in 2023, compared with 2,518 operating days in 2022, and the United States division achieving 3,853 operating days in 2023, compared with 4,088 operating days in 2022. In the U.S., 2023 started at full capacity but began to decline over the second half of the year while Canada fell behind 2022 in the second quarter and remained behind for the balance of the year. Improved operating margins per day, driven by improved day rates, were the key driver for the company's improved year-over-year results. Operating margin per operating day increased 30 per cent in Canada and 31 per cent in the U.S. Capital spending for the year was $24,592,000 in 2023, compared with $17,982,000 in 2022, and included the cost of upgrading one Canadian oil sands configured rig to position it for deep gas drilling. The company's debt balance decreased by $24-million in 2023, exceeding the company's $20-million debt repayment target, and now sits at $69,542,000 total debt, compared with $93,514,000 total debt a year prior.

Colin Dease, Akita's chief executive officer, stated: "Two thousand twenty-three was a successful year, surpassing our debt repayment target, returning to positive retained earnings, improving our year-over-year safety results and taking our first step to reconfigure our fleet of oil sands rigs so they are well equipped for both SAGD drilling, as well as deep gas drilling in order to increase our exposure to one of Canada's strongest market segments. I would like to thank everyone at Akita and our first nation, Metis and Inuvialuit partners for making 2023 a strong year and for their continued commitment to this company."

The company's U.S. division began the year operating at full capacity with all 14 marketed rigs active until August when the declining rig count in the industry began to affect the company, dropping Akita's U.S. rig count to 10 active rigs in September before hitting a low of eight active rigs in October, 2023, and ending the year with nine active rigs. Adjusted operating margin increased 23 per cent to $44,001,000 in 2023, from $35,631,000 in 2022, despite a 6-per-cent decrease in year-over-year operating days. Higher revenue per operating day was the cause of the increased adjusted operating margin. Revenue per day increased 23 per cent to $39,414 in 2023, from $31,996 in 2022, peaking at $40,499 in the second quarter of 2023 and ending the year at $38,628, 2 per cent above the same period of 2022. Pressure on day rates as the active industry rig count fell was the cause of the decrease in rates. Revenue in the U.S. accounted for 64 per cent of the company's total 2023 adjusted revenue, consistent with 63 per cent in 2022. Adjusted operating margin in the U.S. was 65 per cent of the total for the company in 2023, up from 64 per cent in 2022.

Adjusted operating and maintenance costs increased to $107,863,000 in 2023 from $95,167,000 in 2022, due to higher per day costs, which increased to $27,995 in 2023 from $23,280 in 2022 and peaked in the fourth quarter of 2023 at $30,924. The cause of the increased adjusted operating and maintenance costs is an overall increase in all costs associated with operating a drilling rig. This includes the provision of more ancillary items, such as rental drill pipe at the company's expense, as competition increased in response to the reduced active industry rig count. Adjusted operating and maintenance costs were positively impacted by the receipt of a $4.0-million employee retention credit (ERC) from the IRS. The ERC is a COVID-19 related credit, granted to employers that retained a certain number of employees while experiencing significant decreases in revenue during the pandemic. This amount reduced the total operating costs in the year (2022 -- $2.0-million).

Results in Canada improved in 2023, with adjusted operating margin increasing 16 per cent to $22,967,000 in the year from $19,803,000 in 2022. This increase was driven by improved day rates throughout the fleet, which increased 24 per cent in 2023, when compared with 2022. The impact of improved day rates was partially offset somewhat by reduced activity in 2023, compared with 2022. Operating days fell by 11 per cent in the year due to prolonged forest fires and conservation activities, which reduced second quarter activity and led to fewer operating days for Akita's double rigs. During 2023, Akita achieved 2,239 operating days in Canada, which corresponds to an annual utilization rate of 31 per cent, compared with a 2023 industry average of 36 per cent and a 2022 utilization rate for the company of 34 per cent (2,518 days).

Adjusted operating and maintenance expenses increased 9 per cent to $62,714,000 in 2023 from $57,634,000 in 2022. The increase was not in line with the 11-per-cent decrease in operating days but was reflective of increased per day costs. On a per-day basis, adjusted operating and maintenance costs increased to $28,010 in 2023 from $22,889 in 2022. Higher labour costs, which make up 68 per cent of the total operating and maintenance expense in 2023, were the main cause of the increase. Also contributing to higher operating and maintenance costs in 2023 were higher maintenance costs in the year over all due to start-up costs on two rigs.

Further information

This news release shall be used as preparation for reading the full disclosure documents. Akita's audited consolidated financial statements and management's discussion and analysis for the year ended Dec. 31, 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

Non-GAAP financial measures

Adjusted revenue and 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 expenses 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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