AKITA Drilling Ltd. Announces Year-to-Date Earnings and Cash Flow

CALGARY, July 28, 2017

The Company incurred a net loss of $9,466,000 for the six months ended June 30, 2017 ($0.53 per share basic & diluted) on revenue of $37,179,000 compared to net earnings of $14,111,000 ($0.79 per share basic & diluted) on revenue of $45,636,000 ($17,386,000 from direct operations and $28,250,000 from contract cancellation revenue) in the comparative period in 2016. Funds flow from operations for the January to June period of 2017 was $5,078,000 compared to $28,071,000 for the same period in 2016.

Improving crude oil prices beginning in the second quarter of 2016 and continuing through the first quarter of 2017 had a positive effect on activity in the drilling industry. In response to this increase in activity, management's focus for the six months ended June 30, 2017 has been to improve the Company's utilization, with more rigs and employees working. AKITA's utilization increased to 37% for the 6 months ended June 30, 2017 from 13% in the corresponding period of 2016. AKITA's focus on increasing its rig utilization had some downside, as rates in the drilling market continue to be at the bottom range of the cycle impacting the Company's margins which were significantly lower year to date in 2017, compared to the same period in 2016.

Selected information from AKITA Drilling Ltd.'s Management Discussion and Analysis from the Quarterly Report as follows:

Introduction and General Overview

Activity levels in the contract drilling industry are highly correlated to the market prices of crude oil and natural gas. The average WTI crude oil prices for the six months ended June 30, 2017 increased 16% compared to the same period in 2016. Natural gas prices, per AECO spot prices, have followed a similar pattern with an increase of 23% in the average price of natural gas for the first 6 months of 2017 compared to the first 6 months in 2016. The increase in both crude oil and natural gas prices had a positive effect on drilling activity in the western Canadian sedimentary basin.

Despite the higher activity levels, however, day rates in the drilling industry remain at the bottom of the cycle as the demand for drilling rigs has not caught up to the supply of rigs available. The impact of these low day rates on the Company's results is detailed subsequently in this MD&A.