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Akita Drilling collects rewards from ties with Arctic aboriginals Sets new benchmarks for profits, earnings and cash flow in 2001 and strongly placed through Inuvialuit business venture to dominate natural gas drilling Gary Park PNA Canadian Correspondent
Akita Drilling Ltd.’s careful fostering of relationships with Canada’s northern communities is starting to pay dividends for the Calgary-based company.
Lifted by a strong overall market, it posed a year of records in 2001 — earnings, revenue, shares and cash flow.
It collected a resounding seal of approval from the Canadian government on April 2 when it received C$1.1 million in federal money towards aboriginal participation in a new C$22.6 million Akita rig.
The addition of the rig, to be built, owned and operated by Akita/Equtak Drilling Ltd. — a joint venture with the Inuvialuit Development Corp. — allows the IDC to move into the drilling sector and positions the company to capture the bulk of drilling work in the Mackenzie Delta.
For the year ended Dec. 31, Akita racked up profits of C$17.89 million on revenues of C$110,84 million, compared with C$1.16 million on revenue of C$88.44 million in 2000. Cash flow from operations grew to C$26.96 million from C$17.11 million.
Akita notched another record by investing C$70.46 million on capital projects, up from C$34.65 million in 2000, the bulk going to four new rigs, including an C$18-million rig for the Mackenzie Delta. Thirty-six rigs In releasing the results, Akita said the focus for its 36-rig fleet remains on deep natural gas and heavy oil drilling along with the execution of its northern strategy that is based on joint ventures in the Northwest Territories.
To hedge its future, Akita has negotiated contracts for the quartet of new rigs that are effective until 2004-2006 and ensure the company has “standby” revenues at pre-determined rates to carry it through slow periods.
Canadian industry records show Akita was the third most active driller, completing 1,322 wells for a total depth of about 3.6 million feel at an average depth per well of 2,720 feet.
The company’s rig utilization rate was 60 percent in 2000 and 56.9 percent in 2001, topping the industry average of 53 percent.
Murray Roth, Akita’s vice-president of finances, said the major long-term contracts will help soften the predicted downturn of about 25 percent in Canada this year.
While conceding Akita “will be impacted in an adverse manner” if the forecasters are on the mark, he was confident the new rigs will offer a shield “against a certain portion of the overall downdraft.” Long-term goodwill In the Northwest Territories, Akita has invested heavily in first establishing its long-term goodwill by building a reputation for cooperating with aboriginal people and showing respect for the land.
The result has been a series of joint ventures with aboriginal corporations.
In 1999, Akita and the Inuvialuit Development Corp. jointly formed Akita/Equtak Drilling to construct and own four 16,500-foot capacity rigs. The IDC is a diversified management company, wholly owned by the Inuvialuit Regional Corp., which in turn is directly controlled by 5,000 residents in the Inuvialuit land claim region.
The rigs are being co-funded and co-owned, with Akita’s cost estimated at C$50 million. Akita/Equtak will mange the rigs, which include C$2 million camps handling up to 60 workers and designed to operate in minus 50-degree weather.
A spokesman for the Inuvialuit Regional Corp. credited Akita with “taking the time to do things right,” by dealing with each aboriginal group on its own terms. Other joint ventures As a pioneer in the post-land claims world of northern development, Akita has made other breakthroughs, striking two other joint ventures — Akita/Sahcho Drilling Ltd. for drilling in the southwest corner of the Northwest Territories, a portion of northern British Columbia and parts of southeast Yukon territories; and Akita/Sahtu Drilling Ltd., to drill prospects in the central Mackenzie River region.
Shane Parrish, general manager of Acho Dene Koe Corporate Group — the development corporation for the gas-rich Fort Liard area in the lower Northwest Territories — said his joint venture has provided job training for 35 people from the Deh Cho community, along with employment opportunities for northern people on Akita’s southern rigs during the summer.
He is counting on Akita continuing to fuel the Fort Liard economy by also using local services and renting camp equipment, trucks, loaders and aircraft.
A three-year working relationship with the Sahtu Development Corp. has been equally beneficial, with local hiring accounting for 75 percent of Akita/Sahtu’s workforce, while the SDC has agreed to buy a 50 percent stake in a new rig with financing supplied by Akita.
Ethel Blondin-Andrew, the Member of Parliament for Western Arctic, said Inuvialuit-owned drill rigs “provide a center around which apprenticeship activities can be organized.”
Inuvialuit Regional Corp. chair Nellie Cournoyea said the return of the oil and gas industry to the Delta/Beaufort Sea will allow the IDC to establish itself as the “drilling contractor of choice with companies exploring for natural gas in the region.”
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