Akita Drilling Ltd. (AKT) 2024年年度報告「TSX」.pdf

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1、ANNUAL REPORT20241Annual MeetingThe annual meeting(the“Meeting”)of the shareholders of AKITA DRILLING LTD.(the“Company”)will be held in a virtual only format via live webcast on Tuesday,May 13,2025 at 10:00 a.m.Mountain Daylight Time.Details on how to access the Meeting can be found in the Companys

2、Management Proxy Circular.CORPORATEPROFILEAKITA Drilling Ltd.is a premier oil and gas drilling contractor with drilling operations throughout North America.The Company strives to be the industry leader in safety,equipment quality,drilling performance,employee and customer relations,and First Nations

3、,Mtis and Inuvialuit partnerships.In addition to conventional drilling,the Company specializes in pad and other purpose-built drilling rigs and is active in directional,horizontal and underbalanced drilling providing specialized drilling services to a broad range of independent and multinational oil

4、 and gas companies.AKITA currently employs,at full operations,approximately 1,000 people.The Company has ownership in 32 drilling rigs in all depth ranges.AKITA DRILLING|2024 Annual Report1AKITA DRILLING|2024 Annual Report2FORWARD-LOOKING STATEMENTSFrom time to time AKITA makes forward-looking state

5、ments.These statements include but are not limited to comments with respect to AKITAs objectives and strategies,financial condition,results of operations,the outlook for industry and risk management discussions.In particular,forward-looking information in this MD&A includes,but is not limited to,ref

6、erences to the outlook for the North American economy and the drilling industry(including the demand for drilling services,customer exploration and development budgets and drilling programs,day rates,active rig count,supply issues and labour shortages),the demand for oil and natural gas,crude oil an

7、d natural gas prices,the Companys SAGD drilling activity,the Companys existing credit facility,the Companys operating performance and cash flows,future investment,debt repayment,tax rates,the Companys capital program,advantages associated with the percentage of pad drilling rigs in the Companys Cana

8、dian fleet,and the expansion of the Companys presence in the Montney deep gas basin and its role in drilling potash and in achieving energy transition targets,and the upgrading of one of the Companys oil sands rigs for deep gas drilling.Although the Company believes that the expectations reflected i

9、n the forward-looking information are reasonable based on the information available on the date such statements are made and processes used to prepare the information,such statements are not guarantees of future performance and no assurance can be given that these expectations will prove to be corre

10、ct.By their nature,these forward-looking statements involve numerous assumptions,inherent risks and uncertainties,both general and specific,and therefore carry the risk that the predictions and other forward-looking statements will not be realized.Readers of this MD&A are cautioned not to place undu

11、e reliance on these statements as a number of important factors could cause actual future results to differ materially from the plans,objectives,estimates and intentions expressed in such forward-looking statements.The Companys actual results could differ materially from those anticipated in these f

12、orward-looking statements as a result of,among other things:Prevailing economic conditions including world crude oil prices,North American natural gas prices and global liquified natural gas(LNG)demand;Fluctuations and uncertainty surrounding the future price of commodities;The impact of global supp

13、ly chain disruptions;The impact of the level of industry activity for Canadian and US crude oil and natural gas exploration and development on the demand,pricing and terms for contract drilling services;The impact of changes in demand for crude oil,natural gas or other liquid hydrocarbons on the dem

14、and and pricing for drilling services;The level of exploration and development activity carried on by AKITAs customers;Increased competition,including as a result of the movement of drilling rigs among regions or reduced levels of activity in the oil and gas industry;Energy transition targets and in

15、dustrys ability to achieve them;The loss of one or more major customers;Changes to existing laws,regulations and government policies,and the introduction of new laws and regulations,including those governing the management,transportation and disposal of hazardous substances and other waste materials

16、 and otherwise relating to the protection of the environment;The impact of climate change activism;Access to capital markets including AKITAs ability to obtain additional debt or equity financing;Variations in interest rates and principal repayments under the terms of the Companys credit facility;FO

17、RWARD-LOOKING STATEMENTS The Companys ability to make scheduled payments of principal and interest on,or to refinance,its indebtedness;The sufficiency of AKITAs assets to repay indebtedness under its credit facility in the event repayment were to be accelerated following an event of default;The impa

18、ct of dilutive financings or other transactions;Fluctuations in foreign exchange,interest and tax rates;The adequacy of AKITAs insurance coverage or contractual indemnity rights to cover losses,and the applicability of anti-indemnification legislation;The Companys ability to attract,develop and main

19、tain a skilled and safe workforce and maintain a cost structure that varies with activity levels;The availability of qualified management personnel;A general reduction in rates in the drilling industry caused by a capital overbuild.We caution that the foregoing list of factors is not exhaustive and

20、that while relying on forward-looking statements to make decisions with respect to AKITA,investors and others should carefully consider the foregoing factors,as well as other uncertainties and events,prior to making a decision to invest in AKITA.Except where required by law,the Company does not unde

21、rtake to update any forward-looking statement,whether written or oral,that may be made from time to time by it or on its behalf.Additional information about these and other factors can be found under the“Business Risks and Risk Management”section of the Managements Discussion and Analysis of this 20

22、24 Annual Report for AKITA.FORWARD-LOOKING STATEMENTSCONTENTS1Corporate Profile8Letter to the Shareowners4Operational Performance 6Share Performance10Managements Discussion and Analysis36Managements Responsibility for Financial Reporting38Auditors Report44Consolidated Financial Statements48Notes to

23、the Consolidated Financial Statements7610 Year Financial Review79Corporate InformationCONTENTSAKITA DRILLING|2024 Annual Report3AKITA DRILLING|2024 Annual Report4OPERATIONAL PERFORMANCE200,000150,000100,00050,000202020212022202320240250,00040,0000(100,000)20202021202220232024(80,000)(20,000)(60,000)

24、(40,000)30,00010,0002020202120222023202420,00040,00005,00015,00025,00035,000Funds Flow from Continuing Operations($000s)5,0002020202120222023202425,00015,0000Capital Expenditures($000s)OPERATIONAL PERFORMANCERevenue($000s)Net Earnings(Loss)($000s)30,00020,00010,00020,00045,00050,000AKITA DRILLING|20

25、24 Annual Report5INTEGRITYCOMMITMENTFOUNDATIONALVALUESAt AKITA-integrity,respect and commitment are the foundational values and guiding principles engrained into every aspect of our operations.RESPECTAKITA DRILLING|2024 Annual Report6SHARE PERFORMANCESHAREPERFORMANCEThe graph below compares the cumu

26、lative return over the last five years on the Class A Non-Voting shares and Class B Common shares of the Company from December 31,2024 with the cumulative total return of the S&P/TSX Composite Stock Index and the TSX Energy Services Sub-Index over the same period,assuming reinvestment of dividends.D

27、ec 31,2019Dec 31,2020Dec 31,2021Dec 31,2022Dec 31,2023Dec 31,2024AKITA Class A Non-Voting Shares1004079145115134AKITA Class B Common Shares100127157166119159S&P/TSX Composite Index100102124114123145TSX Equal Weight Oil&Gas10069109139137160200150100500201920202021202220232024Five Year Total Return on

28、$100 InvestmentAKITA DRILLING|2024 Annual Report7SHARE PERFORMANCEShare Performance20202021202220232024Weighted average number of Class A and Class B shares30,608,19139,608,19139,608,19139,658,52039,729,732Total number of Class A and Class B shares39,608,19139,608,19139,650,19139,710,19139,734,191Ma

29、rket prices for Class A Non-Voting sharesHigh$1.22$1.54$2.96$2.05$1.87 Low$0.25$0.50$0.89$1.08$1.20 Close$0.48$0.94$1.73$1.37$1.60 Volume21,339,0807,239,64720,529,99212,340,3807,938,498Market prices for Class B Common sharesHigh$2.89$3.00$4.98$2.45$5.25 Low$0.67$0.98$1.50$1.35$1.55 Close$0.77$2.46$2

30、.60$1.87$2.50 Volume45,98614,17219,5304,8548,879AKITA DRILLING|2024 Annual Report8LETTER TO THE SHAREOWNERSAKITAs continued focus on setting and maintaining high standards,striving for excellence,and conducting its business with integrity were instrumental to our success in 2024 despite challenging

31、market conditions.In Canada,2024 was a more active year for both the industry and AKITA.The industry achieved 61,457 operating days in 2024 compared to 57,944 in 2023,marking a 6%increase.AKITA outpaced industrys growth,with 2,719 operating days in 2024,up from 2,239 in 2023,equivalent to a 21%incre

32、ase.This heightened activity positively impacted our adjusted margin per operating day in Canada,which increased to$11,612 in 2024 from$10,258 in 2023.Additionally,the Canadian Division successfully upgraded one of its oilsands triple rigs in January 2024 enabling it to drill deep natural gas wells,

33、and the rig performed consistently well throughout the year.Looking into 2025,the Canadian Division started the year very active and the Canadian Association of Energy Contractors forecasted continued industry growth,estimating 69,344 operating days in 2025,up 4,706 days from 2024.In the US,the acti

34、ve rig count declined significantly in the second half of 2023 and throughout 2024,creating challenging conditions for the industry.AKITAs active rig count followed a similar trajectory but rebounded in the latter half of 2024,ending the year with 13 of 14 marketed rigs in operation.Over the fourth

35、quarter,AKITAs utilization rate more than doubled industrys average.Despite this recovery,however,AKITAs US Division activity fell to 3,025 operating days in 2024 from 3,853 in 2023,as the late-year rebound could not fully offset weaker activity over the first three quarters.The decline in activity

36、also affected adjusted operating margin per day,which dropped by 9%year-over-year.The US market outlook for 2025 remains uncertain,with industry sentiment not anticipating a material recovery in rig count.A key corporate objective for 2024 was to reduce debt by$20 million,a goal achieved in December

37、 2024.This milestone lowered long-term debt to$50 million from$94 million in 2022.Notably,our debt coverage ratio also improved,dropping below 1x and sitting at 0.93:1 debt to EBITDA at year-end.Operational excellence remains a top priority for the Company,which begins by deploying experienced crews

38、 supported by strong mentorship and oversight at all levels in the field.This focus enhances crew retention,which is essential for safe and efficient operations.Further reflecting our commitment to operational excellence,AKITA invested$28,043,000 in rig maintenance and upgrades in 2024,primarily for

39、 maintenance capital allocated to improve efficiencies and minimize downtime caused by premature equipment failures.Linda Southern-HeathcottColin DeaseAKITA DRILLING|2024 Annual Report9LETTER TO THE SHAREOWNERSIn closing,we extend our sincere appreciation to AKITAs employees for their adaptability,h

40、ard work,and dedication to excellence.We also recognize the invaluable contributions of our directors,whose guidance has fostered a strong and successful company,as well as our First Nation,Mtis,and Inuvialuit partners.Lastly,we thank our shareholders for their continued support and confidence in AK

41、ITA Drilling.On behalf of the Board of Directors,Linda Southern-Heathcott Executive Chairman of the Board Colin DeasePresident and Chief Executive OfficerMarch 5,2025LETTER TO THE SHAREOWNERSAKITA DRILLING|2024 Annual Report10MANAGEMENTS DISCUSSION&ANALYSISMANAGEMENTSDISCUSSION&ANALYSISThe following

42、 managements discussion and analysis(“MD&A”)of the financial condition and results of operations is intended to help the reader understand the current and prospective financial position and operating results of AKITA Drilling Ltd.(“AKITA”or the“Company”).The MD&A discusses the operating and financia

43、l results for the year ended December 31,2024,is dated March 5,2025,and takes into consideration information available up to that date.The MD&A is based on the audited annual consolidated financial statements of AKITA for the year ended December 31,2024.The MD&A should be read in conjunction with th

44、e audited annual consolidated financial statements and related notes for the year ended December 31,2024,prepared in accordance with International Financial Reporting Standards(“IFRS Accounting Standards”)as issued by the International Standards Board(“IASB”).Additional information is available on A

45、KITAs website(www.AKITA-D)and all previous public filings,including the most recently filed Annual Report and Annual Information Form,are available through SEDAR+(www.sedarplus.ca).All amounts are denominated in Canadian dollars(“CAD”)and stated in thousands unless otherwise identified.IntroductionA

46、KITA is a premier Canadian oil and gas drilling contractor with a fleet of 32 drilling rigs.AKITA provides contract drilling services through two geographical segments:Canada and the United States(“US”).AKITAs US fleet is supported out of its operations base in Midland,Texas and is comprised of 13 h

47、igh specification AC triple rigs,one high specification AC double rig and one DC triple rig,primarily serving the Permian Basin,which is the most active basin in the US and is currently supporting approximately half of all US land drilling.With a fleet of 17 rigs,AKITAs Canadian division operates in

48、 Alberta,British Columbia and Saskatchewan.AKITAs Canadian division primarily operates in the oil sands,heavy oil regions and in the Montney deep gas basin.The Canadian division operates both wholly-owned rigs and rigs that are partially owned by AKITA and First Nation,Mtis or Inuvialuit joint ventu

49、re partners including Akita Mistiyapew Aski Drilling Ltd.,a joint venture between AKITA and Saulteau First Nations,Akita Equtak Drilling Ltd.,a joint venture between AKITA and the Inuvialuit Development Corporation,and Akita Wood Buffalo Drilling Ltd.,a joint venture between AKITA and Chipewyan Prai

50、rie First Nation,Fort McMurray 468 First Nation,Fort McKay Mtis Nation,Fort Chipewyan Mtis Local 125,and Conklin Mtis Local 193.Together AKITAs First Nation,Mtis and Inuvialuit joint venture partners hold equity interests in five of AKITAs Canadian drilling rigs.AKITA DRILLING|2024 Annual Report11MA

51、NAGEMENTS DISCUSSION&ANALYSISIn both Canada and the US,AKITA strives to ensure it is well positioned to meet the demanding requirements of global operators while remaining flexible enough to tailor its services to customized operator requests.Fostered over three decades of operation,AKITA has establ

52、ished a leading safety culture and is committed to coaching and mentoring its personnel to ensure they develop as future leaders and ambassadors for the Company.AKITA is extremely proud of the First Nation,Mtis and Inuvialuit joint venture relationships it has forged in Canada,which help to ensure s

53、uch communities benefit from resource development AKITA is involved in proximate to their traditional lands.Financial HighlightsFor the Three Months Ended December 31,For the Year Ended December 31,$Thousands,except per share amounts20242023Change%Change20242023Change%ChangeRevenue62,857 47,317 15,5

54、40 33%193,325225,479(32,154)(14%)Operating and maintenance expenses45,008 38,228 6,780 18%144,052 167,029(22,977)(14%)Operating margin17,849 9,089 8,760 96%49,273 58,450 (9,177)(16%)Margin%28%19%9%47%25%26%(1%)(4%)Net cash from operating activities5,946 17,523(11,577)(66%)30,264 35,567 (5,303)(15%)A

55、djusted funds flow from operations(1)18,634 7,177 11,457 160%44,714 45,522(808)(2%)Per share0.47 0.18 0.29 161%1.13 1.15(0.02)(2%)Net income(loss)9,609 (1,166)10,775 924%12,863 18,415 (5,552)(30%)Per share0.24 (0.03)0.27 900%0.32 0.46(0.14)(30%)Capital expenditures9,604 12,822(3,218)(25%)28,043 24,5

56、92 3,451 14%Weighted average shares outstanding 39,734 39,684 50 0%39,730 39,659 71 0%Total assets 268,763 263,6405,123 2%Total debt50,000 70,000(20,000)(29%)(1)See“Non-GAAP and Supplementary Financial Measures near the end of this MD&A for further detail.General OverviewFor AKITA,2024 activity was

57、a mirror image of 2023.The Company began 2023 on a strong note but saw a decline in both activity and results by the end of the year.In contrast,2024 started slower in terms of activity,but showed significant improvement throughout the year,culminating in a very strong fourth quarter,with 75%of the

58、Companys earnings for the year generated in the last quarter of the year.AKITA ended the year with net earnings of$12,863,000 in 2024,compared to$18,415,000 in 2023,a decrease of 30%year over year due to reduced activity in the US for most of the year,which was partially offset by stronger results i

59、n AKITAs Canadian division.Adjusted funds flow from operations of$44,714,000 in 2024 was slightly lower than adjusted funds flow from operations of$45,522,000 in the prior year.Canadian activity increased 21%in 2024 when compared to 2023,which translated into a 37%increase in adjusted operating marg

60、in in Canada.In the US,activity decreased year over year,dropping 21%in 2024 when compared to 2023 which in turn reduced the Companys operating margin 28%year over year.Capital spending for the year was 14%higher in 2024 than in 2023,mostly made up of routine capital items.The Company achieved its d

61、ebt repayment target for 2024,reducing debt by$20,000,000 and ending the year with a debt balance,excluding capitalized transaction costs,of$50,000,000.This marks the second year of$20,000,000 or more of debt repayment,which has decreased the Companys interest expense from$6,502,000 in 2023 to$4,511

62、,000 in 2024.AKITA DRILLING|2024 Annual Report12MANAGEMENTS DISCUSSION&ANALYSISOil and gas drilling activity is cyclical and is affected by numerous factors,most importantly world crude oil prices,North American natural gas prices and international LNG(liquified natural gas)pricing.West Texas Interm

63、ediate(“WTI”)crude oil prices decreased in the third quarter of 2024,ending the year at$70 USD/bbl,down 5%from$74 USD/bbl at the start of the year.Natural gas prices have seen a more significant decrease in the year as well as more volatility,with the AECO decreasing 28%in the year from$2.47/GJ at t

64、he start of 2024 to$1.78/GJ at the end of the year.This decreasing commodity price environment is having an impact on demand in the industry,particularly in the US.In the US,the total active rig count,which decreased over the first half of the year,remained relatively flat in the second half of 2024

65、.Over the last three years,the active rig count increased by 180 rigs in 2022,decreased by 150 rigs in 2023 and declined a further 28 rigs in 2024,ending the year at 573 active rigs.Several factors are influencing the active rig count in the US including decreasing prices for WTI,and more significan

66、tly,declining natural gas prices.The drop in natural gas prices has severely impacted demand for drilling rigs in gas basins,which has predominantly led to more competition in oil basins such as the Permian Basin.Also contributing to the low active rig count in the US is the impact of recent major c

67、onsolidation among large US oil and gas companies,which are growing through consolidation rather than through increased drilling activity.The surplus of idle drilling rigs in the industry is having a negative effect on day rates which have been under pressure since the rig count began to fall in 202

68、3.In Canada,industry activity in 2024 began the year in line with 2023,but started to outpace 2023 levels in the second quarter of 2024.The commencement of commercial operations of the Trans Mountain Pipeline expansion in the second quarter of 2024,which increased the egress of Canadian crude oil to

69、 tidewater,along with the anticipated completion of LNG Canadas export facility in 2025 in conjunction with the completion of the Coastal GasLink,has led to increased demand for drilling services in both oil and natural gas in Canada during the year.While this increase in activity is positive,it has

70、 not yet resulted in significant upwards pricing pressure,as there remains underutilized capacity in the industry for certain classes of drilling rigs.Industry Overview1)Source:U.S.Energy Information Administration2)Source:Daily Oil Bulletin(“DOB”)3)Source:Canadian Association of Energy Contractors(

71、“CAOEC”)4)Source:Baker Hughes North American Rotary Rig CountJANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC130.00110.0090.0070.0050.0030.0010.00WTI Prices($USD/bbl)(1)JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC8.07.06.05.04.03.02.01.00AECO Natural Gas Price($CAD/GJ)(2)JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC275250225200

72、175150125Canada Active Rig Count(3)JANFEBMARAPRMAYJUNJULAUGSEPOCTNOVDEC850800750700650600550500US Active Rig Count(4)202420232022AKITA DRILLING|2024 Annual Report13MANAGEMENTS DISCUSSION&ANALYSISResults by SegmentCanadaFor the Three Months Ended December 31,For the Year Ended December 31,$Thousands

73、except per day amounts20242023Change%Change20242023Change%ChangeRevenue Canada24,024 11,768 12,256 104%64,235 56,005 8,230 15%Revenue from joint venture drilling rigs12,806 7,672 5,134 67%45,991 35,662 10,329 29%Flow through charges(1)(2,674)(860)(1,814)(211%)(5,213)(5,986)773 13%Adjusted revenue Ca

74、nada(1)34,156 18,580 15,576 84%105,013 85,681 19,332 23%Operating and maintenanceexpenses Canada16,383 8,935 7,448 83%46,440 41,556 4,884 12%Operating and maintenance expenses from joint venture drilling rigs8,962 6,129 2,833 46%32,212 27,144 5,068 19%Flow through charges(1)(2,674)(860)(1,814)(211%)

75、(5,213)(5,986)773 13%Adjusted operating and maintenance expenses Canada(1)22,671 14,204 8,467 60%73,439 62,714 10,725 17%Adjusted operating margin Canada(1)11,485 4,376 7,109 162%31,574 22,967 8,607 37%Margin%(1)34%24%10%42%30%27%3%11%Operating days 900 465 435 94%2,719 2,239 480 21%Adjusted revenue

76、 per operating day(1)37,951 39,957(2,006)(5%)38,622 38,268 354 1%Adjusted operating and maintenance expenses per operating day(1)25,190 30,546(5,356)(18%)27,010 28,010(1,000)(4%)Adjusted operating margin per operating day(1)12,761 9,411 3,350 36%11,612 10,258 1,354 13%Utilization(1)58%25%33%132%44%3

77、1%13%42%Rig count 17 20 (3)(15%)17 20 (3)(15%)(1)See“Non-GAAP and Supplementary Financial Measures near the end of this MD&A for further detail.Results in Canada improved for the second consecutive year in 2024,with adjusted operating margin increasing 37%to$31,574,000 in the year,from$22,967,000 in

78、 2023.This increase was primarily driven by increased activity in the year with operating days increasing 21%to 2,719 days in 2024 compared to 2,239 days in 2023.This increase in operating days was primarily driven by the Companys double rig category which made up 68%of the total increase,followed b

79、y AKITAs single rigs,which made up 22%of the increase,with the balance attributed to AKITAs triple rigs.During 2024,AKITAs Canadian fleet was 44%utilized which is equal to the utilization for the industry as a whole.Adjusted revenue per operating day was consistent year over year,with only a 1%chang

80、e from 2023 into 2024.The Company secured some moderate day rate increases in 2024,however,these rate increases were overshadowed by the higher adjusted revenue per day the Company achieved in the fourth quarter of 2023,which drove up the 2023 average and was related to a contract on two rigs that w

81、ere commissioned and commenced operations,but which saw their drilling programs subsequently cancelled and resulting in the reimbursement of costs incurred which drove up both revenue and costs in the fourth quarter of 2023.AKITA DRILLING|2024 Annual Report14MANAGEMENTS DISCUSSION&ANALYSISAdjusted o

82、perating and maintenance expenses per day decreased by 4%to$27,010 in 2024 from$28,010 in 2023.The decrease in operating and maintenance expense per day was attributable to fewer start-up costs in 2024,when compared to the fourth quarter of 2023.With consistent adjusted revenue per operating day and

83、 decreasing adjusted operating and maintenance expense per operating day the adjusted operating margin per operating day increased 13%year over year which also contributed to the overall increase in the results in Canada.AKITAs Canadian division provided drilling services to 21 different customers i

84、n 2024(2023-15 different customers),including five customers that each provided more than 10%of AKITAs Canadian revenue for the year(2023 four customers).United StatesFor the Three Months Ended December 31,For the Year Ended December 31,$Thousands except per day amounts20242023Change%Change20242023C

85、hange%ChangeRevenue US38,832 35,549 3,283 9%129,090 169,474(40,384)(24%)Flow through charges(1)(3,440)(4,183)743 18%(14,092)(17,610)3,518 20%Adjusted revenue US(1)35,392 31,366 4,026 13%114,998 151,864(36,866)(24%)Operating and maintenance expenses US28,625 29,293(668)(2%)97,612 125,473(27,861)(22%)

86、Flow through charges(1)(3,440)(4,183)743 18%(14,092)(17,610)3,518 20%Adjusted operating and maintenance expenses US(1)25,185 25,110 75 0%83,520 107,863(24,343)(23%)Adjusted operating margin US(1)10,207 6,256 3,951 63%31,478 44,001(12,523)(28%)Margin%(1)29%20%9%45%27%29%(2%)(7%)Operating days969 812

87、157 19%3,025 3,853(828)(21%)Adjusted revenue per operating day(1)36,524 38,628(2,104)(5%)38,016 39,414(1,398)(4%)Adjusted operating and maintenance expenses per operating day(1)25,991 30,924(4,933)(16%)27,610 27,995(385)(1%)Adjusted operating margin per operating day(1)10,533 7,704 2,829 37%10,406 1

88、1,419(1,013)(9%)Utilization(1)70%59%11%19%55%70%(15%)(21%)Rig count 15 15 -0%15 15 -0%(1)See“Non-GAAP and Supplementary Financial Measures near the end of this MD&A for further detail.The Companys US division began the year with 11 of 15 rigs operating,which declined to 8 rigs in the second quarter,

89、then increased to 13 active rigs by year end.This recovery in AKITAs US active rig count contrasted the US industry as a whole,which started the year at 601 active rigs and declined throughout the year to end at 573 active rigs.AKITAs increased rig count in the fourth quarter of 2024 was not enough

90、to offset the activity losses over the first three quarters of the year,resulting in operating days falling to 3,025 in 2024(55%utilization)from 3,853 operating days in 2023(70%utilization).This reduction in activity was the key driver in the decrease in the adjusted operating margin in the US,which

91、 fell 28%to$31,478,000 in 2024 from$44,001,000 in 2023.Adjusted revenue per day decreased in 2024 to$38,016 from$39,414 in 2023,as reduction in the industry active rig count put pricing pressure on contractors competing for fewer jobs.Slightly offsetting this decrease in adjusted revenue per day was

92、 a reduction in adjusted operating and maintenance expense per operating day,which decreased to$27,610 in 2024 from$27,995 in 2023.A focus on cost reduction throughout the year,combined with the impact of increased capital expenditures in 2023 and 2024,which reduced premature failures of equipment a

93、nd therefore decreased maintenance costs,enabled the Company to reduce costs despite the price AKITA DRILLING|2024 Annual Report15MANAGEMENTS DISCUSSION&ANALYSISof the Companys inputs increasing year over year.Adjusted operating and maintenance costs were positively impacted in 2023 by the receipt o

94、f 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 2023.Adjusting f

95、or this amount,adjusted operating and maintenance expense per day decreased 5%year over year.Revenue in the US accounted for 52%of the Companys total 2024 adjusted revenue,compared to 64%in 2023,due to a combination of the Canadian division strengthening while activity weakened in the US division.In

96、 the US,AKITA provided drilling services to 24 different customers in 2024(2023 25 customers),including four customers that provided more than 10%of AKITAs US revenue for the year(2023 two customers).Future Outlook and StrategyThe drilling industry is cyclical and certain key factors that impact AKI

97、TAs results are beyond managements control.Like other drilling contractors,AKITA is exposed to the effects of fluctuating oil and gas prices and changes in the exploration and development budgets of its customers.The outlook for the drilling industry in 2025 is somewhat opaque with both oil and natu

98、ral gas prices being at relative lows when compared to the last three years.Activity in Canada started the year stronger and strengthened further over the course of the year in 2024 compared to 2023.This trend of demand for drilling services is expected to continue into 2025,with increasing activity

99、.In November of 2024,CAOEC released its 2025 Drilling and Service Rig Forecast which estimated 6,604 wells to be drilled in 2025,up 448 from 2024 and for drilling operating days to increase by 4,706 days in 2025 to 69,344.A positive factor in the Canadian market is LNG Canadas export facility,which

100、will come online in 2025 and is expected to secure additional markets for Canadian natural gas,thereby increasing demand for drilling services.The Canadian market may be impacted if tariffs are imposed on the export of Canadian oil and gas to the United States,although the impact of such tariffs can

101、not be estimated at this time.The Company is still anticipating a stronger 2025 in Canada than 2024,as the momentum in the industry continues,with drilling for deep gas and oil sands activity expected to remain strong despite tariffs.In the US,the active rig count ended 2024 at 573 rigs,down 6%from

102、the 601 rigs active at the start of 2024.Market sentiment suggests current activity levels are likely to persist through at least the first half of 2025.In 2024,large US operators focused on growth through consolidation rather than drilling new wells.If this trend continues,the active rig count will

103、 likely remain flat in 2025.There are some indications,however,that the active rig count in the US could begin to increase in the second half of 2025.First,the drilled but uncompleted well count(“DUC”)continues to decline and a decreasing DUC count can be a positive leading indicator for increased d

104、rilling demand.Additionally,there is increased investment in the takeaway capacity of natural gas out of the Permian to the Gulf Coast to feed the expanding demand of the LNG export terminals.The Permian Highway Pipeline,the expansion of the Whistler Pipeline and the Matterhorn Express Pipeline,all

105、will help get gas out of the Permian,and could lead to increased prices for natural gas,and strengthen demand for drilling.Although there is the potential for activity in 2025 to increase from the current levels in both Canada and the US,AKITA is taking a cautious approach to the year and continuing

106、 to focus on debt repayment.The intention is to reach a level of debt that is easily maintainable through the weakest market cycles the industry experiences.The Companys capital plans for 2025 are in line with 2024,however,there is the potential for additional upgrade capital if the right opportunit

107、y warrants it.AKITA DRILLING|2024 Annual Report16MANAGEMENTS DISCUSSION&ANALYSISSeasonalityThe Canadian drilling industry is seasonal with activity typically building in the fall as the ground freezes and peaking during the winter months.Northern transportation routes become available once areas wit

108、h muskeg conditions freeze to allow the movement of drilling rigs and other heavy equipment.The peak Canadian drilling season ends with“spring break-up”at which time drilling operations are curtailed due to seasonal road bans(temporary prohibitions on road use)and restricted access to agricultural l

109、and as frozen ground thaws.The summer drilling season begins when road bans are lifted,typically in late June or early July.Some areas are subject to environmental orders which can prevent drilling activity on certain well leases over periods when authorities prioritize wildlife or habitat protectio

110、n.Such restrictions may affect activity levels and operating results.While seasonality can affect all rig classes,pad drilling rigs are generally less susceptible to seasonality than conventional drilling rigs as pad rigs can be situated on a pad just before the start of spring break up,with the abi

111、lity to drill several wells before a rig move on restricted roads would be necessary.The Permian Basin,where AKITA primarily conducts its US drilling operations,is infrequently subject to weather constraints,but may experience operational restrictions for other reasons.Depreciation and Amortization

112、Expense$Millions20242023Change%ChangeDepreciation and amortization expense27.628.5(0.9)(3%)The decrease in depreciation and amortization expense to$27,594,000 in 2024 from$28,510,000 in 2023 is due to a change in the estimated useful life of certain rig assets that are lasting longer than in the pas

113、t.AKITA depreciates its drilling rig assets on a straight-line basis where the estimated useful lives and residual values of various rig components have been chosen to match the expected life of that component.In 2024 and 2023,drilling rig depreciation accounted for 98%of total depreciation expense.

114、While AKITA conducts some of its drilling operations via joint ventures,the drilling rigs used to conduct those activities are owned jointly by AKITA and its joint venture partners,and not by the joint ventures themselves.As the joint ventures do not hold any property,plant,or equipment assets direc

115、tly,the Companys depreciation expense includes depreciation on assets involved in both wholly-owned and joint venture activities.Selling and Administrative Expenses$Millions20242023Change%ChangeSelling and administrative expenses17.016.10.96%Selling and administrative expenses increased to$17,037,00

116、0 in 2024 from$16,120,000 in 2023 due to higher share-based compensation,which increased$450,000 in 2024 and salary inflation.Selling and administrative expenses increased to 9%of revenue in 2024,up from 7%in 2023.The single largest component of selling and administrative expenses is salaries and be

117、nefits which accounted for 43%of such expenses in 2024,up from 41%in 2023.AKITA DRILLING|2024 Annual Report17MANAGEMENTS DISCUSSION&ANALYSISAsset ImpairmentThe Company did not identify any changes in the indicators of asset impairment or any new indicators of asset impairment during 2024 or 2023.Acc

118、ordingly,no further assessment on asset impairment was performed as there have been no changes in circumstances that indicate that the carrying amount of property,plant and equipment does not exceed its recoverable amount as at December 31,2024.Equity Income from Joint VenturesEquity income from joi

119、nt ventures is comprised of the following:$Millions20242023Change%ChangeProportionate share of revenue from joint ventures 46.0 35.7 10.3 29%Proportionate share of operating&maintenance expenses from joint ventures 32.2 27.1 5.1 19%Proportionate share of selling and administrative expenses from join

120、t ventures 0.5 0.4 0.1 25%Equity income from joint ventures 13.3 8.2 5.1 62%The Company provides the same drilling services and utilizes the same management,financial and reporting controls for its joint venture activities as it does for its wholly-owned operations.AKITAs joint venture operations ar

121、e in Canada and accounted for using the equity method of accounting but represent the same revenue and expenses of AKITAs wholly-owned rigs.The analyses of these activities are incorporated throughout the relevant sections of this MD&A relating to activity,revenue per day,as well as operating expens

122、es.The increase in revenue for the Companys proportionate share of joint ventures year over year relates primarily to the increased activity in SAGD(steam assisted gravity drainage)drilling,which is the key market for the Companys joint venture rigs.Other Income(Loss)$Millions20242023Change%ChangeIn

123、terest income0.20.3(0.1)(33%)Interest and financing expense(4.5)(6.5)2.0(31%)Gain on sale of assets 0.22.2(2.0)(91%)Unrealized gain(loss)on risk management contracts(0.3)0.1(0.4)(400%)Net other gains2.20.41.8450%Total other loss(2.2)(3.5)1.3(37%)The Company recorded interest and financing expense of

124、$4,512,000 for 2024,down from$6,502,000 in 2023.This decrease is due to a lower average debt balance in 2024 of$59,562,000 compared to$80,500,000 in 2023 and to a decrease in the Companys interest expense,resulting from a decrease in interest rates,which averaged 7.03%in 2024 down from 7.99%in 2023.

125、The Company is exposed to changes in interest rates on borrowings under its operating loan facility,which is subject to floating interest rates.To mitigate this risk the Company entered into an interest rate swap with its principal banker in June of 2022.The term of the interest rate swap is June 15

126、,2022 to June 15,2026 and the notional amount of the swap is$50,000,000.The fixed rate is 4.24%while the floating rate is indexed to the Canadian Overnight Repo Rate(“CORRA”).At period end the interest rate swap is valued at fair value with any unrealized gain(loss)recorded as other income(loss)on t

127、he consolidated income statement.For the year ended December 31,2024 the Company recorded an unrealized loss of$311,000 compared to a gain of$95,000 in 2023.AKITA DRILLING|2024 Annual Report18MANAGEMENTS DISCUSSION&ANALYSISDuring 2024,the Company realized a gain of$187,000 on the sale of idle equipm

128、ent,compared to$2,199,000 in 2023 on the sale of certain components,including the centre section of an idle rig in the US,as well as spare equipment in Canada.Net other gains in 2024 relates to the gain on the settlement of an insurance claim for$2,134,000,which the Company received payment for in D

129、ecember of 2024.In 2023 net other gains was primarily on the sale of fully depreciated assets.Income Tax Expenses$Millions,except income tax rate(%)20242023Change%ChangeCurrent tax expensen/aDeferred tax expense(recovery)2.9 0.1 2.8 2800%Total income tax expense(recovery)2.9 0.1 2.8 2800%Effective i

130、ncome tax rate23.9%23.7%AKITA had an income tax expense of$2,910,000 in 2024,compared to an income tax expense of$130,000 in 2023.The increase in deferred income tax expense relates to the increased profitability in the Companys Canadian division.A net deferred tax asset has not been recognized for$

131、66 million(2023$67 million).This amount is primarily related to non-capital losses carried forward.Total gross tax losses available to the Company are$380,893,000 with$357,469,000 in the US and$23,423,000 in Canada.The first of these losses will begin to expire in 2031.Net Income(Loss),Net Cash and

132、Adjusted Funds Flow$Millions20242023Change%ChangeNet income(loss)12.918.4(5.5)(30%)Net cash from operating activities30.335.6(5.3)(15%)Adjusted funds flow from operations(1)44.745.5(0.8)(2%)(1)See“Non-GAAP and Supplementary Financial Measures near the end of this MD&A for further detail.During 2024,

133、the Company recorded net income of$12,863,000(net income of$0.33 per Class A Non-Voting and Class B Common share(basic and diluted)compared to net earnings of$18,415,000(net earnings of$0.48 per Class A Non-Voting and Class B Common share(basic and diluted)in 2023.The decrease in net income was prim

134、arily attributable to lower activity in the US,while other differences between 2024 and 2023 offset each other.The reduced interest expense in 2024 was counterbalanced by a higher deferred tax expense,and the insurance gain in 2024 was comparable to the gain on sale of assets in 2023.As a result,the

135、 decline in US activity remained the key factor driving the decrease in net income.Additionally,net cash from operating activities decreased to$30,264,000 in 2024,down from$35,567,000 in 2023,due to the same factors affecting net income.Adjusted funds flow from operations,which is not impacted by ch

136、anges in non-cash working capital,decreased slightly in 2024 to$44,714,000 from$45,522,000 in 2023.The decrease in funds flow from operations was less than the decrease in net income due to the addback of deferred tax,which is a non-cash expense that was higher in 2024($2,910,000)than in 2023($130,0

137、00)and the elimination of the gain on sale of assets in 2023 of$2,199,000.AKITA DRILLING|2024 Annual Report19MANAGEMENTS DISCUSSION&ANALYSISSummary of Quarterly ResultsThe following table shows key selected quarterly financial information for the Company:Three Months Ended$Thousands,except per share

138、(unaudited)Mar.31Jun.30Sep.30Dec.31Annual Totals2024Revenue 46,30438,33645,82862,857193,325Net income(loss)2,627(478)1,1069,60812,863Income(loss)per share(basic and diluted)($)0.07(0.01)0.03 0.230.32Adjusted funds flow from operations(1)11,2606,3878,34518,72244,714Cash flow from operations6,94810,91

139、36,458 5,94530,264Capital expenditures3,9357,1267,378 9,60428,0432023Revenue 65,00058,34954,81347,317225,479Net income(loss)9,5236,1773,880(1,165)18,415Income(loss)per share(basic and diluted)($)0.240.160.10(0.04)0.46Adjusted funds flow from operations(1)15,15912,62010,5667,17745,522Cash flow from(u

140、sed in)operations(414)16,1502,30817,52335,567Capital expenditures2,5044,7004,56612,82224,5922022Revenue 44,98642,96053,52659,524200,996Net Income(loss)(2,933)(4,252)2,6608,8134,288Loss per share(basic and diluted)($)(0.07)(0.11)0.070.220.11Adjusted funds flow from operations(1)4,9964,7168,95716,1443

141、4,813Cash flow from operations2476,1893,7278,03518,198Capital expenditures6,4123,6333,0204,91717,982(1)See“Non-GAAP and Supplementary Financial Measures near the end of this MD&A for further detail.AKITA DRILLING|2024 Annual Report20MANAGEMENTS DISCUSSION&ANALYSISKey trends over the past 12 quarters

142、,after giving consideration to the seasonal nature of AKITAs operations,are as follows:The impact of the significant improvement in the profitability of the US operating segment can be seen beginning in the third quarter of 2022 with higher activity and day rates in the US improving results for the

143、Company as a whole and then slowing down in the fourth quarter of 2023 as activity in the US dropped from 14 active rigs to 6 active rigs;Revenue in the first quarter of 2022 was split relatively equally between Canada and the United States.The majority of revenue shifted to the US in the fourth qua

144、rter of 2022 and returned to an even split in the first quarter of 2024.In the fourth quarter of 2024,revenue was 51%from US operations and 49%from Canada when including AKITAs share of revenue from joint ventures;The fourth quarter of 2024 was the most profitable quarter of the last twelve quarters

145、 with the highest net income as well as the highest funds flow from operations;and The seasonal nature of the Companys Canadian operations,which typically means cash from operations peaks in the second quarter of the year,as activity in Canada slows down for breakup and the working capital that buil

146、t in the first quarter is released,can be seen in the cash from operations balances.Three Year Annual Financial SummaryThe following table highlights AKITAs annual financial results for the last three years:$Thousands,except per share 202420232022Revenue193,325225,479200,996Net income12,863 18,415 4

147、,288 Income per share(basic)0.33 0.46 0.11 Adjusted funds flow from operations(1)44,71445,52234,813Net cash from operating activities30,264 35,567 18,198 Year-end working capital22,55927,13031,121Year-end shareholders equity171,505155,962137,851Year-end total assets268,763263,640268,281(1)See“Non-GA

148、AP and Supplementary Financial Measures near the end of this MD&A for further detail.Liquidity and Capital ResourcesAt December 31,2024,AKITA had$23,549,000 in working capital(working capital ratio of 1.64:1)with$7,032,000 of cash,compared to a working capital of$27,130,000(working capital ratio of

149、1.85:1)and$11,187,000 cash the previous year.In 2024,AKITA generated$30,264,000 in cash from operating activities.Positive cash was also generated from joint venture distributions($10,804,000)and from proceeds on sales of assets($446,000).During the same period,$28,043,000 of cash was used for capit

150、al expenditures and$20,000,000 of cash was used for debt repayment.Accounts payable at year-end included$17,957,000 in accrued expenses,the majority of which relates to routine operations.The Company has a syndicated credit agreement with the Companys principal banker as the agent on the syndication

151、 along with three other Canadian banks.The operating loan facility totals$110,000,000.The credit facility expires in September of 2026.The interest rate ranges from 175 to 300 basis points over prime interest rates depending on the Funded Debt(1)to EBITDA(1)Ratio.Security for this facility includes

152、all present and after-acquired personal property and a first floating charge over all other present and after-acquired property including real property.The financial covenants are:AKITA DRILLING|2024 Annual Report21MANAGEMENTS DISCUSSION&ANALYSIS1.The Funded Debt(1)to EBITDA(1)Ratio:the Company shal

153、l ensure that the Funded Debt(1)to EBITDA(1)Ratio shall not be more than 3.00:1.00.The Funded Debt(1)to EBITDA(1)Ratio shall be calculated quarterly on the last day of each Fiscal Quarter on a rolling four quarter basis;2.The EBITDA(1)to Interest Expense(1)Ratio:the Company shall ensure that the EBI

154、TDA(1)to Interest Expense(1)Ratio shall not be less than 3.00:1.00.The EBITDA(1)to Interest Expense(1)Ratio shall be calculated quarterly on the last day of each Fiscal Quarter on a rolling four quarter basis.At December 31,2024,the Company was in compliance with its covenants with a Funded Debt(1)t

155、o EBITDA(1)Ratio of 0.94:1.00,and an EBITDA(1)to Interest Expense(1)Ratio of 10.35:1.00.The facility also includes a borrowing base calculation which is the sum of:(i)75%of Eligible Accounts Receivable(1);plus(ii)50%of the orderly liquidated value of all Eligible Rig Assets(1);less(iii)Priority Paya

156、bles(1)of the Loan Parties.At December 31,2024,the Companys borrowing base totalled$140,826,000.The credit facility includes a$10,000,000 operating line of credit that is classified as current,given that the Company expects to settle the balance within a normal operating cycle.The maturity date alig

157、ns with the total credit facility.At December 31,2024 and December 31,2023,the current portion of debt was nil.The balance outstanding under the credit loan facility,net of unamortized loan fees,is classified as long-term debt as the credit agreement has no required repayment obligations prior to th

158、e end of the loan facility term.The Company borrowed$50,000,000 from this facility as at December 31,2024(December 31,2023-$70,000,000).The Companys objectives when managing capital are:to safeguard the Companys ability to continue as a going concern,so that it can continue to provide returns for sh

159、areholders and benefits for other stakeholders;and to augment existing resources in order to meet further growth opportunities.The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets.In ord

160、er to maintain or adjust the capital structure,the Company may elect to pay dividends to Shareholders,adjust the amount of dividends paid to shareholders,repurchase shares,issue new shares,sell assets or take on long-term debt.Property,Plant and EquipmentCapital expenditures totaled$28,043,000 in 20

161、24($24,592,000 in 2023).Capital spending in 2024 was as follows:$16,139,000(2023-$13,360,000)for certifications and overhauls,$531,000(2023-$1,380,000)for drill pipe and drill collars,$10,667,000(2023-$8,910,000)for drilling rig equipment and upgrades,and$706,000 in other capital assets(2023-$942,00

162、0).During 2024,the Company sold ancillary assets for$446,000(2023-$2,788,000)that resulted in a gain of$187,000(2023 gain of$2,199,000).(1)See Non-GAAP and Supplementary Financial Measures near the end of the MD&A for further detail.AKITA DRILLING|2024 Annual Report22MANAGEMENTS DISCUSSION&ANALYSISF

163、inancial InstrumentsThe Companys financial assets and liabilities include cash,accounts receivable,accounts payable,accrued liabilities and financial instruments.Fair values approximate carrying values unless otherwise stated.The Company is exposed to risks caused by fluctuations in currency exchang

164、e rates.US contracts are denominated in US dollars and,accordingly,a material decrease in the value of the US dollar could negatively impact revenues.The Company does not currently use hedges to offset this risk.Management continues to consider the credit risk associated with accounts receivable to

165、be generally low.AKITA has conservative credit-granting procedures and in certain situations requires customers to make advance payment prior to provision of services or takes other measures to mitigate credit risk.Provisions have been estimated by management and are included in the accounts to reco

166、gnize potential credit losses.Off Balance Sheet TransactionsAKITA has not entered into any arrangements that involve off balance sheet transactions.Related Party TransactionsAKITA is affiliated with the ATCO Group of companies and with Spruce Meadows,an equestrian show jumping facility,through its m

167、ajority shareholder.All related party transactions in 2024 and 2023 were made in the normal course of business with regular payment terms and have been recorded at the paid amounts.In 2024,operating purchases totaled$1,483,000,and included sponsorship and advertising of$350,000,operational costs of$

168、1,050,000 and other miscellaneous purchases of$83,000.At December 31,2024,the outstanding commitment of the Companys multi-year sponsorship and advertising contract with Spruce Meadows was$350,000.Costs incurred related to this contract during 2024 were$350,000(2023-$350,000).Costs and related servi

169、ces are consistent with parties dealing at arms length.The Company is related to its joint ventures.The following table summarizes transactions and annual balances with its joint ventures.These transactions were made in the normal course of business with regular payment terms and have been recorded

170、at the paid amounts.$Thousands20242023Operating and maintenance expenses 5,8375,727Selling and administrative expenses 710 581 Year-end due to AKITA from joint venture partners 1,412 2,248 Year-end due to AKITA from joint ventures658 3,470 Commitments and ContingenciesFrom time to time,the Company e

171、nters into drilling contracts with its customers that are for extended periods.At December 31,2024,however,the Company had no drilling rigs with multi-year contracts.The Company has entered into a two year contract with a related party to provide sponsorship and advertising at an annual cost of$350,

172、000.This sponsorship contract has been recurring since 2004.At December 31,2024,the Company had capital expenditure commitments of$2,486,000(2023$5,109,000).AKITA DRILLING|2024 Annual Report23MANAGEMENTS DISCUSSION&ANALYSIS23Class A Non-Voting and Class B Common SharesAuthorizedAn unlimited number o

173、f Class A Non-Voting shares An unlimited number of Class B Common sharesIssuedClass A Non-VotingClass B CommonTotal$Thousands,except share amountsNumber of SharesConsiderationNumber of SharesConsiderationNumber of SharesConsiderationDecember 31,202338,056,407144,9821,653,7841,36639,710,191146,348Sto

174、ck options exercised24,00017-24,00017December 31,202438,080,407144,9991,653,7841,36639,734,191146,365 At March 5,2025,the Company had 38,080,407 Class A Non-Voting shares and 1,653,784 Class B Common shares outstanding.At that date,there were also 1,853,500 stock options outstanding,of which 947,000

175、 were exercisable.Accounting EstimatesThe preparation of AKITAs consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as at the date of the consolidated financial sta

176、tements as well as reported amounts for revenue and expenses for the year.Estimates and judgments are continually evaluated and are based upon historical experience and other factors including expectations of future events that are believed to be reasonable in the circumstances.Actual outcomes,howev

177、er,can differ materially from such estimates.The Company makes assumptions relating to transactions that were incomplete at the Statement of Financial Position date.Depending on the actual transaction,total assets and liabilities of the Company as well as results of operations,including net income,c

178、ould be either understated or overstated as a result of differences between amounts accrued for incomplete transactions and the subsequent actual balances.The preparation of AKITAs consolidated financial statements requires management to make significant estimates relating to the useful lives of dri

179、lling rigs.Depreciation methods and rates have been selected so as to amortize the net cost of each asset over its expected useful life to its estimated residual value.The estimated useful lives,residual values and depreciation methods are reviewed at the end of each annual reporting period.AKITAs d

180、epreciation estimates do not have any effect on the changes to the financial condition for the Company,as depreciation is a non-cash item.However,total assets and results of operations,including net income,could be either understated or overstated as a result of excessively high or low depreciation

181、estimates.At each reporting date,the Company assesses whether there are indicators of asset impairment.If such indicators exist,the Company performs an asset impairment test and,if required,the Company recognizes an asset impairment loss calculated as the lesser of the difference between the amortiz

182、ed cost of the asset and the present value of the estimated future cash flows or the recoverable amount.The carrying amount of the asset is reduced by the impairment loss.Impairment losses recognized in prior periods are assessed at each reporting date for any indicators that the impairment losses m

183、ay no longer exist or may have decreased.In the event that an impairment loss reverses,the carrying amount of the asset is increased to the revised estimate of its recoverable amount,but AKITA DRILLING|2024 Annual Report24MANAGEMENTS DISCUSSION&ANALYSISCrude Oil and Natural Gas PricesFluctuations an

184、d uncertainty surrounding the future price of commodities could lead to changes in demand for oil and natural gas,and may impact the economics of planned drilling projects and ongoing production projects,resulting in the curtailment,reduction,delay or postponement of such projects for an indefinite

185、period of time.The price AKITAs customers receive for their production has a direct impact on the cash flow available to them and the subsequent demand for drilling services provided by AKITA.An extended period of lower oil and natural gas prices could result in a decline in demand and day rates.Hig

186、h volatility in crude oil and natural gas prices may also impact AKITAs customers capital programs,causing delays in spending and lower overall demand for drilling services.Tariff RiskThe impact of tariffs on Canadian exports into the United States,including energy exports,as well as potential retal

187、iatory tariffs on goods imported into Canada from the United States could have a material adverse impact on the Company.Tariffs could negatively impact Canadian oil and gas companies who rely on the US export market and lead to Canadian operators curtailing their drilling programs.Further,supply cos

188、ts incurred by AKITA to conduct drilling operations could increase as a result of proposed tariffs.Competition The contract drilling industry is highly competitive and includes a large number of drilling contractors with varied rig fleets.Drilling contracts are usually awarded through a competitive

189、bid process with pricing,rig suitability and availability being primary drivers in the bid process.Other factors that influence the bid process include:mobility and efficiency of the rig,location of the rig in relation to the drilling location,experience and quality of service provided by rig crews,

190、safety record of the rig as well as the contractor as a whole,and the adaptability of equipment to utilize new technologies.Rigs can be moved from one region to another depending on the competitive environment within these regions and therefore a contractors competitive advantage in a region can be

191、quickly eroded by other contractors moving in equipment from other regions.Reduced levels of activity in the oil and gas industry can also increase competition and therefore lower day rates.Advancements in technologyAdvancements in technology could impact AKITAs ability to remain competitive.New tec

192、hnology is required to meet demands for complex drilling programs and improve efficiency and there is a risk that competitors may have access to technologies that put them at a competitive advantage and render some of AKITAs services or equipment obsolete.Access to or development of new technology c

193、an be costly.only to the extent that the carrying amount does not exceed the amount that would have been determined had no impairment loss been recognized on the asset in prior periods.AKITAs asset impairment estimates do not have any effect on the changes to financial condition for the Company,as a

194、ny asset write down would be a non-cash item.However,total assets and results of operations,including net income,could be overstated as a result of projections of discounted future cash flows that are too high.A significant estimate used in the preparation of AKITAs consolidated financial statements

195、 relates to the long-term defined benefit pension liability for certain retired employees that was recorded as$3,999,000 at December 31,2024(2023-$4,091,000).Changes in AKITAs pension liability estimates do not have any effect on the changes to the financial condition of the Company,since the define

196、d benefit pension is a non-cash item.However,total liabilities and results of operations,including net income,could be either understated or overstated as a result of pension estimates that are either too high or too low.AKITA utilizes the services of a third party to assist in the actuarial estimat

197、e of the Companys pension expense and liability.For both 2024 and 2023,a key assumption is the 4.6%discount rate at year end.The Company makes assumptions relating to deferred income taxes,including future tax rates,timing of reversals of timing differences and the anticipated tax rules that will be

198、 in place when timing differences reverse.Consequently,total liabilities of the Company as well as results of operations,including net income,could be either understated or overstated.Business Risks and Risk ManagementThe following information is a summary only of certain risk factors relating to th

199、e business of AKITA and is qualified in its entirety by reference to and must be read in conjunction with,the detailed information appearing elsewhere in this document.Shareholders and potential shareholders should consider carefully the information contained herein and,in particular,the following r

200、isk factors:AKITA DRILLING|2024 Annual Report25MANAGEMENTS DISCUSSION&ANALYSISDependence on Major Customers AKITA earned 14%of its total revenue in 2024 from one major customer.This was the only customer who individually provided over 10%of the Companys revenue for the year.The loss of one or more m

201、ajor customers or a significant reduction in the business done with any customer without offsetting new revenue could have a material adverse effect on AKITAs business,results of operations and prospects.Volatility of Industry Conditions The demand,pricing and terms for contract drilling services ar

202、e dependent upon the level of industry activity for Canadian and US crude oil and natural gas exploration and development.Industry conditions are influenced by numerous factors which AKITA does not control including(without limitation):current crude oil and natural gas prices,expectations about futu

203、re crude oil and natural gas prices,the cost of exploring for,producing and delivering crude oil and natural gas,the expected rates of decline in current production for AKITAs customers,discovery rates of new oil and gas reserves by AKITAs customers,sufficient crew labour,available pipeline and othe

204、r oil and gas transportation capacity,weather conditions,political,regulatory and economic conditions,influences from special interest groups,the use of energy generated from sources that are not crude oil or natural gas based,the ability of oil and gas companies to raise equity capital or debt fina

205、ncing and technological advances in the exploration and production of crude oil and natural gas.The level of activity in both the Canadian and US oil and gas exploration and production industry is volatile.No assurance can be given that the expected trends in oil and gas exploration and production a

206、ctivities will continue or that demand for contract drilling services will reflect the level of activity in the industry.Recent global economic events and uncertainty have significantly affected commodity pricing.While commodity pricing recovered over the course of 2022 to pre-pandemic levels,a retu

207、rn to a prolonged substantial reduction in crude oil and natural gas prices would likely lead to a reduction in oil and gas production levels and therefore adversely affect the demand for drilling services to oil and gas customers.Any elimination or curtailment of government incentives or adverse ch

208、anges in government regulation,including introduction of tariffs,could have a significant impact on the contract drilling industry in Canada or in the US.These factors could lead to a decline in demand for AKITAs services which could result in a material adverse effect on AKITAs business,financial c

209、ondition,results of operations and cash flows.AKITAs customers rely on access to pipelines and liquified natural gas facilities to increase transportation and refinery capacity.There has been downward pressure on oil and natural gas prices in Western Canada due to delays to critical infrastructure c

210、onstruction projects as a result of political pressure,both within Canada and the US,and societal pressures leading to permit cancellations.These delays may depress AKITAs customers overall exploration and production activities which could impact the demand for drilling services.Labour The contract

211、drilling industry is dependent upon attracting,developing and maintaining a skilled and safe workforce.During periods of peak activity levels,AKITA is susceptible to increased labour costs as a result of a competitive labour market or may be faced with a lack of experienced personnel to operate AKIT

212、As equipment.There is a risk of unionization efforts to parts of the Companys workforce that could lead to increased costs due to strikes,work stoppages,other labour disruptions and collective bargaining agreements.AKITA is also faced with the challenge of retaining employees during periods of low u

213、tilization.The Companys financial results depend,at least in part,upon its ability to attract,develop and maintain a skilled work force,while maintaining a cost structure that varies with activity levels.A number of AKITAs key customers evaluate the ability of contract drilling companies to provide

214、and maintain a high standard of safe operations prior to their selecting a drilling contractor for the provision of drilling services.AKITAs financial success is related to its ability to continue to meet those expectations.Capital Overbuild in Contract Drilling Industry Drilling rigs have a long li

215、fe span.Further,there is a significant lag between when the decision to build a rig is made and when the construction is complete.High demand typically spurs greater capital expenditures by drilling contractors which may,in turn,lead to excessive supply in future periods.A potential capital overbuil

216、d could lead to a general reduction in rates in the industry as a whole,which could have a material adverse effect on AKITAs business,financial condition,results of operations and cash flows.The cyclical nature of AKITAs business makes the impact of this risk significant.Debt ServiceAKITA has a synd

217、icated credit facility.Variations in interest rates and principal repayments,under the terms of the facility,could result in significant changes in the amount required to be applied to debt service before payment of any amounts by AKITA.Although managements view is that AKITAs current facility is su

218、fficient,there is no assurance that it will be adequate for the future financial obligations of AKITA or that additional funds can be obtained if required.AKITAs credit facility is a revolving facility which matures on September 11,2026 and is subject to annual extensions of an additional year on ea

219、ch anniversary date of the closing date,contingent upon the consent of the lenders holding two-thirds of the aggregate commitments under the facility.To the extent the facility is not extended,the drawn down principal would be due AKITA DRILLING|2024 Annual Report26MANAGEMENTS DISCUSSION&ANALYSISon

220、the maturity date.Interest payments are required quarterly and are based on the Canadian prime rate for Canadian prime rate loans and the US prime rate for US rate loans.Leverage and Restrictive CovenantsAKITA has third party debt service obligations under its credit facility.The degree to which AKI

221、TA is leveraged could have important consequences to shareholders,including:(i)a portion of the consolidated cash flow from operations could be dedicated to the payment of the principal and interest on indebtedness,thereby reducing cash available for other initiatives;and(ii)certain borrowings are a

222、t variable rates of interest,which exposes AKITA to the risk of increased interest rates.AKITAs ability to make scheduled payments of principal and interest on,or to refinance,its indebtedness will depend on its future operating performance and cash flow,which are subject to prevailing economic cond

223、itions,prevailing interest rate levels and financial,competitive,business and other factors,many of which are beyond its control.AKITAs credit facilities contain certain customary operating covenants that limit the discretion of management to incur additional indebtedness,to create liens or other en

224、cumbrances,to pay dividends or make certain other payments,investments,loans and guarantees and to sell or otherwise dispose of assets and merge or consolidate with another entity.In addition,AKITA is required to satisfy and maintain two financial ratio tests,Debt to EBITDA and EBITDA to Interest Ex

225、pense.A failure to comply with the obligations in the agreements in respect of the credit facilities could result in an event of default which,if not cured or waived,could permit acceleration of the repayment of the relevant indebtedness.If the repayment of the indebtedness under the credit faciliti

226、es were to be accelerated,there can be no assurance that AKITAs assets would be sufficient to repay the debt.Access to Additional Financing AKITA may find it necessary in the future to obtain additional debt or equity financing to support ongoing operations,undertake capital expenditures or undertak

227、e acquisitions or other business combination activities.There can be no guarantee that AKITA will have access to the required capital as its ability to do so is dependent on,among other factors,the overall state of capital markets,interest rates,the oil and gas industry as well as the appetite for i

228、nvestment in the oilfield drilling industry.As an oilfield service company,AKITAs ability to obtain additional debt or equity financing could be constrained by pressure from investors and environmental groups to divest from fossil fuel related investments.An inability to obtain necessary financing,o

229、n terms that are acceptable to AKITA,could limit AKITAs growth and could have a material adverse effect on AKITAs business,financial condition and cash flows in the future.Access to financing also impacts AKITAs customers,potentially limiting capital budgets and therefore the demand for AKITAs servi

230、ces.AKITAs customers also rely on favourable access to credit and debt capital markets to fund capital budgets.They may face the same risks relating to the state of markets,interest rates and appetite for investment in hydrocarbons.Customers may choose to reduce their capital budget if the cost of a

231、ccessing additional funding is unfavourable which would lower the demand for drilling services.Foreign Exchange and Foreign Operations RiskAKITAs operations in the United States increase the Companys exposure to risks inherent in foreign operations.The Company is exposed to risks caused by fluctuati

232、ons in currency exchange rates.US contracts are denominated in US dollars and,accordingly,a material decrease in the value of the US dollar could negatively impact revenues.In addition to foreign exchange,risks include,but are not limited to:different taxation regimes,potential litigation and potent

233、ial political protectionist measures.While AKITA has increased its insurance coverage to offset the increased chance of litigation and has engaged third party experts to assist in taxation matters,there can be no assurance that the Company will be fully effective in mitigating foreign operation risk

234、s.Such risks could have material adverse effects on AKITAs business,financial condition,results of operations and cash flows.Regulation of Industry AKITAs operations are subject to a variety of federal,provincial,state and local laws,regulations and guidelines relating to health and safety,the condu

235、ct of operations,the operation of equipment used in drilling operations and the transportation of materials and equipment provided to customers.Compliance with,or breaches of,such laws,or costs or implications of changes to such laws,regulations and guidelines could have a material effect on AKITAs

236、business,financial condition,results of operations and cash flows.CybersecurityAKITAs business is becoming increasingly reliant on information technology for delivery ofservices to its customers both in the field and in the office.An increasing reliance on information technology exposes the Company

237、to cybersecurity issues through either malicious attacks,unauthorized access or human error.These issues could lead to disruption of services,potential loss of information or improper use of assets,any of which could have a material effect on the Companys reputation and financial position.AKITA DRIL

238、LING|2024 Annual Report27MANAGEMENTS DISCUSSION&ANALYSISSafety IssuesThe Company is governed by industry safety standards in both Canada and the United States.These regulatory standards outline safety frameworks that serve as the minimum baseline for AKITAs safety policies and procedures.Failure to

239、comply with these guidelines could result in a reduction in demand for the Companys services as safety performance is an important criteria for contractor selection by AKITAs customers and could have a material financial impact to the Company.Litigation and Unknown LiabilitiesFrom time to time,AKITA

240、 is subject to legal proceedings relating to its business.Legal actions against the Company may have a material impact on the Companys financial position despite having insurance to cover such claims.The Companys assessment of the financial impact of these matters is based on historical claims and m

241、anagements assessment of the likelihood of such a claim resulting in a material financial impact to the Company.Carbon Emissions,Climate Change Activism and Environmental Regulations While AKITAs operations,and those of its customers,are subject to numerous laws,regulations and guidelines governing

242、the management,transportation and disposal of hazardous substances and other waste materials and otherwise relating to the protection of the environment,the trend in environmental regulation has been to impose more restrictions and limitations on activities that may impact the environment,particular

243、ly regarding the generation of carbon emissions.AKITA operates in jurisdictions that have regulated,or proposed to regulate,industrial carbon emissions.Laws and regulations implemented to reduce carbon emissions have potential to impose significant compliance costs on the oil and gas,potash and mini

244、ng companies that the Company provides drilling services for.Consequently,future oil and gas,potash and mining development could face increased operating costs relating to increased carbon regulation which could result in a reduced demand for the drilling services that AKITA provides.In recent years

245、,public support for climate change action and pressure by climate activists to shift from fossil fuels to alternative and renewable energy technology has grown.Climate change activism impact could reduce demand for hydrocarbons in favour of lower carbon intense fuels.Further,within Canada,increased

246、climate change activism has translated to opposition to new pipeline approvals,to ongoing oil sands development and to the practice of hydraulic fracturing.Laws,regulations and guidelines relating to carbon emissions,spills,releases,and discharges of hazardous substances or other waste materials int

247、o the environment,requiring removal or remediation of pollutants or contaminants are increasingly becoming more stringent and can impose civil and criminal penalties for violations.Some of the laws,regulations and guidelines that apply to AKITAs operations also authorize the recovery of natural reso

248、urce damages by governmental authorities,injunctive relief and the imposition of stop,control,remediation and abandonment orders.The costs arising from compliance with such laws,regulations and guidelines may be material to AKITA.While AKITA maintains liability insurance,including insurance for envi

249、ronmental claims,there can be no assurance that such insurance will continue to be available to AKITA on commercially reasonable terms,that the possible types of liabilities that may be incurred by AKITA will be covered by AKITAs insurance,or that the dollar amount of such liabilities will not excee

250、d AKITAs policy limits.Even a partially uninsured claim,if successful and of sufficient magnitude,could have a material adverse effect on AKITAs business,results of operations and prospects.Key Management The success and growth of AKITA are dependent upon its key management personnel.The loss of ser

251、vices of any of such persons without suitable replacements could have a material adverse effect on the business and operations of AKITA.While this risk is mitigated by ongoing succession planning,no assurance can be provided that AKITA will be able to retain key management members.Energy Alternative

252、sAKITAs management cannot predict the impact of changing demand for crude oil and natural gas products.Fuel conservation measures,alternative fuel requirements,opposition to fossil fuel energy,increasing consumer demand for alternatives to crude oil and gas and technological advances in fuel economy

253、 and energy generation devices could reduce the demand for crude oil,natural gas and other liquid hydrocarbons.Any major change in demand for crude oil,natural gas or other liquid hydrocarbons could result in a reduction in the demand for drilling services and could have a material adverse effect on

254、 AKITAs business,financial condition,results of operations and cash flow.Seasonal Nature of Industry In Canada,the level of activity in the contract drilling industry,particularly for conventional rigs,is influenced by seasonal weather patterns.Spring breakup,which typically occurs between mid-March

255、 and mid-June,makes the ground unstable leaving many secondary roads temporarily incapable of supporting the weight of heavy equipment,thereby reducing drilling activity levels.In addition,during excessively rainy periods,equipment moves may be delayed,thereby adversely affecting revenue.Typically,t

256、here is greater demand for contract drilling services in the winter as freezing permits the movement and operation of heavy equipment.Drilling activities tend to increase in the fall AKITA DRILLING|2024 Annual Report28MANAGEMENTS DISCUSSION&ANALYSISas the ground begins to freeze and peak in the wint

257、er months of November through February as areas having muskeg conditions also become accessible to drilling operations.Variability in the weather can therefore create unpredictability in activity and utilization rates.Unusually warm weather may limit access to drilling sites and could have a materia

258、l adverse effect on the Companys business,financial condition,results of operations and cash flows.The Permian Basin,where AKITA primarily conducts its US drilling operations,is infrequently subject to weather constraints,but may experience operational restrictions for other reasons.These restrictio

259、ns could have a material adverse effect on the Companys business,financial condition,results of operations and cash flows.Operating Hazards AKITAs operations are subject to numerous hazards inherent to the drilling industry,including but not limited to:fires or explosions,hydrocarbon influx or kicks

260、,loss of well control,well blow-outs,cratering,collapse of the well,damage to,or loss of,drilling equipment and equipment lost down the hole.AKITAs insurance policies and contractual indemnity rights may not adequately cover all losses,and therefore,the Company may not have adequate insurance covera

261、ge or rights to indemnity for all risks.Pollution and environmental risks may not be fully insurable.AKITA generally attempts to obtain contractual protection against uninsured operating risks from its customers.However,customers who provide contractual indemnification protection may not in all case

262、s maintain adequate insurance or otherwise have the financial resources necessary to support their indemnification obligations.AKITAs insurance or indemnification arrangements may not adequately protect it against liability or loss from all operating hazards.Further,certain states in the US where AK

263、ITA operates have anti-indemnity legislation that could preclude operator indemnification in certain circumstances.The occurrence of a significant event that has not been fully insured or indemnified against,the failure of a customer to meet its indemnification obligations to the Company,or the appl

264、icability of anti-indemnification legislation could materially and adversely affect the results of operations and financial condition of the Company.DilutionAKITAs articles permit the issuance of an unlimited number of Class A Non-Voting and Class B Common shares,and the Company may make future acqu

265、isitions or enter into financings or other transactions involving the issuance of securities of AKITA which may be dilutive.Supply Chain Risk AKITA purchases equipment,raw materials,components and parts from suppliers located in Canada and the US,and from time to time,international suppliers.The rec

266、ent supply chain disruptions manifested in reduced inventory for many of the Companys suppliers.Recognizing the risks presented by the disruptions to the supply chain,AKITAs operations team aims to anticipate the equipment,raw materials,components and parts it may need with sufficient lead time to p

267、rocure same.Notwithstanding this effort,however,ongoing supply chain disruptions could result in our vendors delaying delivery of,or being unable to deliver,such equipment,raw materials,components or parts when ordered.As drilling activity increases,so too does the risk of an undersupplied inventory

268、 of equipment,raw materials,components and parts.In the event the Company is not able to secure equipment,raw materials,components or parts that are critical to AKITAs operations,it could force the Company to suspend operations and have a material adverse effect on AKITAs business and financial cond

269、ition.Pandemic RiskOn March 11,2020,the World Health Organization declared a global pandemic in relation to the spread of COVID-19.As the virus spread across the world,many businesses closed and isolation and social distancing practices were implemented to reduce the spread.The virus and its impact

270、on transacting business resulted in a decline in the world economy.Among other effects,demand for oil decreased materially over the balance of 2020,which resulted in a significant reduction in demand for the Companys drilling services.In addition to the reduced demand for drilling services,the pande

271、mic presented operational challenges for the Companys staff and rig crews as an outbreak of COVID-19 at a rig site could lead to suspended or cancelled operations.The possibility of future pandemics and their impact cannot be estimated at this time but could have a significant impact on the Company

272、and demand for the drilling services.Risk ManagementAKITA manages its risks by:maintaining a conservative balance sheet that includes a low cost structure for the Company;having its risk management committee deliberate periodically to assess,evaluate and develop a plan to deal with the risk conditio

273、ns for the Company;developing an annual strategic business plan and budget to help determine the levels of capital and operating expenditures;continuously developing long-term relationships with a core base of customers who maintain ongoing drilling programs during all phases of the economic cycle;o

274、btaining multi-year drilling contracts whenever possible,but especially when tailoring rig construction or AKITA DRILLING|2024 Annual Report29MANAGEMENTS DISCUSSION&ANALYSISreconfiguration to customer demand;maintaining an efficient fleet of drilling rigs through a rigorous ongoing maintenance progr

275、am;employing well-trained,experienced and responsible employees;ensuring that all employees comply with clearly defined safety standards;reducing health,safety and operational risk by maintaining its rigorous safety policies and procedures;improving the skills of its employees through training progr

276、ams;maintaining effective systems of internal control to safeguard assets and ensure timely and accurate reporting of financial results;maintaining comprehensive insurance policies with respect to its operations;reducing environmental risk through the implementation of industry-leading standards,pol

277、icies and procedures;exploring opportunities to decarbonize its operations;developing and maintaining a succession plan to provide for a smooth transition in the event of key personnel turnover;diversifying into the US market where demand for drilling services is correlated to West Texas Intermediat

278、e pricing rather than Western Canadian Select pricing as in Canada,which allows AKITA to generate revenue denominated in US currency;and expanding beyond oil and natural gas to drill geothermal wells,carbon capture wells and hydrogen storage wells in an aim to ensure it plays a meaningful role in en

279、ergy transition.Disclosure Controls and Internal Controls over Financial ReportingAs of December 31,2024,the Companys management evaluated the effectiveness of the Companys disclosure controls and procedures as required by the Canadian Securities Administrators(“CSA”).This evaluation was performed u

280、nder the supervision of,and with the participation of the Chief Executive Officer(“CEO”)and the Vice President,Finance and Chief Financial Officer(“CFO”).Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in documents filed with

281、the securities regulatory authorities is recorded,processed,summarized and reported on a timely basis.The controls also seek to assure that this information is accumulated and communicated to management,including the CEO and CFO,as appropriate,to allow timely decisions on required disclosure.Based o

282、n this evaluation,the CEO and CFO have concluded that the Companys disclosure controls and procedures were effective at December 31,2024.As of December 31,2024,management evaluated the effectiveness of the Companys internal control over financial reporting as required by the CSA.This evaluation was

283、performed utilizing the framework developed by the Committee of Sponsoring Organizations of the Treadway Commission,as revised effective May 14,2013 under the supervision of,and with the participation of the CEO and CFO.The Companys internal control over financial reporting is designed to provide re

284、asonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with IFRS.Based on this evaluation,the CEO and CFO have concluded that the Companys internal control over financial reporting was effective at December 31,2024 as well as the

285、 year ended December 31,2024.There was no change in the Companys internal control over financial reporting that occurred during the period that began on October 1,2024 and ended December 31,2024 that materially affected,or is reasonably likely to materially affect,the Companys internal control over

286、financial reporting.There was also no change in the Companys internal control over financial reporting that has occurred since December 31,2024.AKITA DRILLING|2024 Annual Report30MANAGEMENTS DISCUSSION&ANALYSISNon-GAAP and Supplementary Financial MeasuresNon-GAAP Financial MeasuresAdjusted Revenue a

287、nd Adjusted Operating and Maintenance Expenses Revenue and operating and maintenance expenses in AKITAs Canadian operating segment include revenue and expenses from AKITAs wholly-owned drilling rigs as well as its share of joint venture revenue and expenses.Excluded from the revenue and expenses in

288、AKITAs Canadian and US 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 comparabil

289、ity 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 Companys net earnings as the amounts offset each other.Adjusted Funds Flow from OperationsAdjusted fu

290、nds flow from operations is not a recognized GAAP measure under IFRS and users of this MD&A should note that AKITAs 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 change

291、s,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 Companys operating results at year-end and within each year,since the se

292、asonal nature of the business affects the comparability of non-cash working capital changes both between and within periods.For the Three Months Ended December 31,For the Year Ended December 31,$Thousands2024202320242023Net cash from operating activities 5,946 17,523 30,264 35,567 Interest paid996 1

293、,243 4,316 6,292 Interest expense(1,044)(1,294)(4,511)(6,502)Lease inducement(569)-(569)-Post-employment benefits paid79 79 315 322 Equity income from joint ventures 3,708 1,488 13,300 8,184 Unrealized gain(loss)on foreign exchange(1,550)391(1,550)391Change in non-cash working capital11,068(12,253)3

294、,1491,268Adjusted funds flow from operations 18,634 7,177 44,714 45,522 Terms Defined in the Companys Credit FacilityThe following terms are defined in the Companys credit facility and are used in the calculation of the Companys financial covenants:“EBITDA”means,for any fiscal period,the Net Income

295、of the Canadian Borrower on a consolidated basis in accordance with GAAP but without duplication,plus(in each case,for the Canadian Borrower on a consolidated basis but without duplication):a)all amounts deducted in the calculation of Net Income in respect of Interest Expense;b)all amounts deducted

296、in the calculation of Net Income in respect of the provision for income taxes(in accordance with Generally Accepted Accounting Principles);AKITA DRILLING|2024 Annual Report31MANAGEMENTS DISCUSSION&ANALYSISc)all amounts deducted in the calculation of Net Income in respect of non-cash items including,

297、without limitation,depletion,accretion(to the extent not included in clause(a)above),depreciation,amortization and future income tax liabilities;d)all amounts deducted in the calculation of Net Income in respect of equity loss,minority interests,extraordinary losses,non-recurring losses(including lo

298、sses on the sale of property,plant and equipment)and any non-cash impairment charges and any other non-cash charges;e)all cash distributions received in such period from persons which are not Guarantors;f)all amounts deducted in the calculation of Net Income in respect of discretionary management bo

299、nuses,fees and other compensation declared and payable to the directors or shareholders of the Canadian Borrower on commercially reasonable terms.For the avoidance of doubt,bonuses,fees or other compensation that the Canadian Borrower,on a consolidated basis,is contractually required to pay may not

300、be added back;g)all amounts deducted in the calculation of Net Income in respect of share based compensation;h)unrealized foreign exchange losses incurred in the ordinary course of business;“Funded Debt”means,as of any date of determination,with respect to the Canadian Borrower on a consolidated bas

301、is,all Indebtedness,but excluding obligations owing between any Loan Parties and less all cash and Cash Equivalents denominated in Canadian Dollars and U.S.Dollars held by the Loan Parties up to a maximum of$10,000,000 and which are:(i)in accounts with the Agent which are subject to Perfected Securi

302、ty Interests and rights of set-off in favour of the Agent;or(ii)in accounts with a financial institution acceptable to the Agent(acting reasonably)which are subject to Perfected Security Interests and a blocked account control agreement in favour of and satisfactory to the Agent.“Interest Expense”me

303、ans for any fiscal period,in respect of the Canadian Borrower on a consolidated basis as determined in accordance with GAAP,the aggregate cost of credit outstanding during that period including,without limitation,interest charges(including for postponed Indebtedness),capitalized interest,the interes

304、t component of Financial Leases,fees payable in respect of letters of credit and letters of guarantee,discounts incurred and fees payable in respect of bankers acceptance advances.“Eligible Accounts Receivable”means at any time,any Account Receivable of the Loan Parties(net of any credit balance,ret

305、urns,trade discounts,or unbilled amounts or retention)that meets and at all times continues to meet all of the standards of eligibility(and the Canadian Borrower by including such account in any computation of the Borrowing Base shall be deemed to represent and warrant to the Agent and the Lenders t

306、hat to the knowledge of the Canadian Borrower all of the following statements are accurate and complete with respect to such account):a)it is a valid and legally enforceable obligation of the applicable Account Debtor;b)such account is genuine as appearing on its face or as represented in the books

307、and records of the Canadian Borrower on a consolidated basis;c)such account is free from valid claims regarding rescission,cancellation or avoidance,whether by operation of Applicable Law or otherwise,and except to the extent of any reduction made pursuant to paragraph(e)of this definition is net of

308、 all then applicable holdbacks and prepayment credits;d)such account does not relate to services not as of yet completed;e)without limiting the generality of paragraph(c)of this definition,is not subject to any offset,counterclaim or other defence on the part of the Account Debtor or any claim by th

309、e Account Debtor that denies liability in whole or in part;and,if the Account Debtor denies liability only in part,the undisputed portion of the Account Receivable shall be allowed so long as the Account Debtor has agreed that it will pay such portion not in dispute in accordance with its terms;f)su

310、ch Account Receivable is not outstanding more than 90 days after billing date,provided that the under 90 day portion may be included;(i)where the over 90 day portion is less than 10%of all Accounts Receivable of such Account Debtor and its Related Parties;(ii)the Agent and the Lenders have neverthel

311、ess designated the Account Receivable as good;or(iii)where the Account Debtor has long term debt obligations rated no worse than BBB by S&P or DBRS Limited;g)it is owed by an Account Debtor whose principal place of business is located in Canada or the United States,unless otherwise supported by a le

312、tter of credit acceptable to the Agent,in its discretion;AKITA DRILLING|2024 Annual Report32MANAGEMENTS DISCUSSION&ANALYSISh)it is denominated in either Canadian Dollars or United States Dollars;i)it is subject to a Perfected Security Interest in favour of the Agent;j)such account is,and at all time

313、s will be,free and clear of all Security Interests other than Priority Payables(to the extent deducted in calculating the Borrowing Base)and any Permitted Encumbrances;k)such account is not in respect of a builders lien or similar holdbacks;l)the Account Receivable does not arise from a sale or leas

314、e to or rendering of services to a Related Party of any Loan Party,or,in each case,to their respective Affiliates;Any Eligible Accounts Receivable which are at any time Eligible Accounts Receivable but which subsequently fail to meet any of the foregoing requirements shall immediately cease to be an

315、 Account Receivable.“Tangible Net Worth”means,as of any date of determination,with respect to the Canadian Borrower on a consolidated basis,the sum of Shareholders Equity and Subordinated Debt,less:a)any amount that would be included on the consolidated balance sheet of the Canadian Borrower prepare

316、d in accordance with GAAP as an investment in or as amounts owed by any Related Party which does not constitute Subordinated Debt;andb)any amount included in the assets column on the consolidated balance sheet of the Canadian Borrower in respect of Intangibles.Non-GAAP Ratios“Adjusted funds flow fro

317、m operations per share”is calculated on the same basis as net income 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 ana

318、lysts,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 p

319、arties and management as it demonstrates a degree of cost control and provides a proxy for specific inflation rates incurred by the CompanySupplementary Financial MeasuresA supplementary financial measure:a)is,or is intended to be,disclosed on a periodic basis to depict the historical or expected fu

320、ture financial performance,financial position or cash flow of the Company;b)is not presented in the financial statements of the Company;c)is not a non-GAAP financial measure;and d)is not a non-GAAP ratio.Supplementary financial measures presented and discussed in this MD&A are as follows:“Operating

321、Margin%”represents operating margin as a percentage of revenue“Adjusted Operating Margin%”represents adjusted operating margin as a percentage of adjusted revenue“Utilization”represents the operating days achieved divided by the maximum operating days based on the number of days in the year and the

322、rigs available.AKITA DRILLING|2024 Annual Report33MANAGEMENTS DISCUSSION&ANALYSISForward-Looking StatementsFrom time to time AKITA makes forward-looking statements.These statements include but are not limited to comments with respect to AKITAs objectives and strategies,financial condition,results of

323、 operations,the outlook for industry and risk management discussions.In particular,forward-looking information in this MD&A includes,but is not limited to,references to the outlook for the North American economy and the drilling industry(including the demand for drilling services,customer exploratio

324、n and development budgets and drilling programs,operating day rates,active rig count,supply issues and labour shortages),pipeline capacity in Canada,the demand for oil and natural gas,crude oil and natural gas prices,future investment,the Companys SAGD drilling activity,the Companys existing credit

325、facility,the Companys operating performance and cash flows,future investment,debt repayment,tax rates,the Companys capital program,advantages associated with the percentage of pad drilling rigs in the Companys Canadian fleet,the expansion of the Companys presence in the Montney deep gas basin,the Co

326、mpanys role in achieving energy transition targets,the impact of the LNG Canada export facility coming online,the possibility that tariffs will be imposed on the export of Canadian oil and gas to the United States,drilling for deep gas,oil sands activity,consolidation among large US drilling operato

327、rs,and investment in the takeaway capacity of natural gas capacity from the Permian Basin to the Gulf Coast.Although the Company believes that the expectations reflected in the forward-looking information are reasonable based on the information available on the date such statements are made and proc

328、esses used to prepare the information,such statements are not guarantees of future performance and no assurance can be given that these expectations will prove to be correct.By their nature,these forward-looking statements involve numerous assumptions,inherent risks and uncertainties,both general an

329、d specific,and therefore carry the risk that the predictions and other forward-looking statements will not be realized.Readers of this MD&A are cautioned not to place undue reliance on these statements as a number of important factors could cause actual future results to differ materially from the p

330、lans,objectives,estimates and intentions expressed in such forward-looking statements.The Companys actual results could differ materially from those anticipated in these forward-looking statements as a result of,among other things:Prevailing economic conditions including world crude oil prices,North

331、 American natural gas prices and global liquified natural gas(LNG)demand;Fluctuations and uncertainty surrounding the future price of commodities;The impact of global supply chain disruptions;The impact of the level of industry activity for Canadian and US crude oil and natural gas exploration and d

332、evelopment on the demand,pricing and terms for contract drilling services;The impact of changes in demand for crude oil,natural gas or other liquid hydrocarbons on the demand and pricing for drilling services;The level of exploration and development activity carried on by AKITAs customers;Increased

333、competition,including as a result of the movement of drilling rigs among regions or reduced levels of activity in the oil and gas industry;Energy transition targets and industrys ability to achieve them;The loss of one or more major customers;Changes to existing laws,regulations and government policies,and the introduction of new laws and regulations,including those governing the management,transp