The oil and gas market is no stranger to volatility, seeing as the global industrial complex could not function without these commodities, making their prices incredibly sensitive to the health of the economy. Recent examples include:
- The COVID pandemic, when WTI lost more than 75 per cent of its value and oil futures turned negative because of a precipitous decrease in demand.
- The beginning of US President Trump’s global tariff regime in Q1 2025, when WTI shed about a quarter of its value.
- The ongoing conflict between US-Israel and Iran, which has displaced about 20 per cent of global oil and gas supply through airstrikes and the militarization of the Strait of Hormuz, creating widespread inflation across the supply chain, including crude prices well beyond the US$100 per barrel mark.
That said, despite these Black Swan Events and many others going back more than half a century, oil and gas remain key pillars supporting the products and services underpinning everyday life, with McKinsey expecting them to account for a leading 41-55 per cent of energy consumption by 2050.
This article is disseminated in partnership with AKITA Drilling Ltd. It is intended to inform investors and should not be taken as a recommendation or financial advice.
This multi-decade growth runway makes oil and gas an attractive sector to put capital to work, incentivizing investors to de-risk through companies with strong fundamentals, thus optimizing their chances of earning differentiated returns. A working due diligence checklist towards this end might include:
- Top-notch financial results, demonstrating strong capital allocation skills while delivering profitable growth, or at the very least robust evidence of being on a path towards it.
- Strategically chosen markets with enduring demand.
- A ‘been there, done that’ leadership team, well-equipped to replicate past successes capitalizing on the oil and gas tailwind and creating shareholder value.
Logically, the spotlight must now turn to a practical way to put this thesis in play.
Why AKITA Drilling is a gold standard oil and gas stock
Investors keen to harvest oil and gas returns while minimizing exposure to price volatility should consider drilling contractors, which have the power to remain productive, even in the face of near-term price swings, by aligning themselves with loci of strong market activity, allowing them to create value across the market lifecycle.
A small-cap company that deserves high-conviction through this lens is AKITA Drilling (TSX:AKT.A), market capitalization C$139 million, an oil and gas drilling contractor with more than 30 years of experience in some of the most prospective regions across North America. These include:
- Canada‘s oil sands, heavy oil and Montney gas basin regions, primarily in Alberta, British Columbia and Saskatchewan, which collectively elevate the country into one of the top 10 hydrocarbon producers in the world.
- The Permian Basin, the most active basin in the United States, supporting about 44 per cent of domestic land drilling, accounting for the lion’s share of why the country occupies the top spot among global oil and gas producers.
AKITA has put its fleet of 32 high-spec drill rigs to productive use over the past few years, leveraging its high-demand markets into a solid financial track record clearly evident on the company’s income statements. Here are the highlights:
- Revenue almost doubled from C$110 million in 2021 to C$193.3 million in 2024.
- EBITDA almost quintupled from C$10.6 million in 2021 to C$48.2 million in 2024.
- Net income grew from C$4.2 million in 2022 to C$12.8 million in 2024.
- Debt fell from C$93.5 million in 2022 to C$49.5 million in 2024.
The company’s financial momentum has, in turn, translated into strong shareholder value, with the stock adding 250 per cent from 2021 to 2024, well ahead of WTI’s 50 per cent effort, demonstrating leadership’s ability to deliver consistent operational leverage beyond fluctuations in the oil price.
AKITA’s value-added 2025
AKITA continued to prove its worth to investors in 2025, registering a 116 per cent return, compared to WTI’s approximately 20 per cent loss, driven by:
- Revenue of C$200.9 million, up from C$193.3 million in 2024.
- Net income of C$13.9 million, up from C$12.8 million in 2024.
- Adjusted funds flow from operations of C$46.6 million, up from C$44.7 million 2024.
This profitable growth, reflecting a particularly strong first half of the year, was also enabled by a further unburdened balance sheet, thanks to a debt load reduction from C$49.6 million to C$35 million by year end – bringing total debt repayment over the past three years to C$59 million – freeing up more of the company’s focus for shareholder value creation, including a normal course issuer bid we’ll discuss later in this article.
USA
AKITA’s US division contributed to a stellar 2025 with an adjusted operating margin of C$32.9 million, up from C$31.4 million in 2024, backed by higher non-recurring revenue related to drill pipe replacement (C$4.3 million, up from C$774,000 in 2024) partially offset by lower US market activity.
The company achieved this growth despite operating days falling from 3,025 to 2,852 year-over-year (YoY) and average rigs in operation falling from 10 at the start of the year to six in June and five in October, amounting to 52 per cent across 2025, down from 55 per cent in 2024. These declines mirror broader US industry conditions, where activity is down by 7 per cent YoY and 32 per cent over the past three years.
US adjusted revenue per operating day was US$38,789 in 2025, up from C$38,016 in 2024, though when adjusted for the non-recurring revenue noted above, the figure results in a decrease of C$489, or 1 per cent, remaining stable YoY despite pricing pressure associated with a lower active rig count. Impressively, this stability extends into Q4 2025, even though rig utilization in the quarter fell from 70 per cent to 34 per cent YoY, demonstrating AKITA’s ability to deliver consistent day rates across its US fleet.
In tandem with growing cash flow, the US business also managed to grow more efficient, cutting adjusted operating and maintenance expenses per operating day to C$27,228 from C$27,610 in 2024, propelled by leadership’s focus on cost controls.
Canada
AKITA’s Canadian division supported profitable growth in 2025 by posting consistent results, including an adjusted operating margin of C$31.43 million, down slightly from C$31.57 million in 2024, leveraging 120 more operating days YoY, as well as operating day increases for its oil sands triples and deep gas triple rigs, up 20 per cent and 15 per cent, respectively, partially offset by a 14 per cent decrease in operating days for single rigs and a 13 per cent decrease for double rigs. Utilization for AKITA’s Canadian fleet reached 46 per cent, slightly ahead of the 43 per cent rate for the overall industry.
The division’s consistency is evident in adjusted revenue per operating day, which shifted less than 1 per cent on a YoY basis, even though the 2024 figure included C$1.5 million in contract cancellation revenue. Even after adjusting for this item, operations still managed a C$653 increase, reflecting modest day rate increases and more higher-margin triple rigs in service.
Although adjusted operating and maintenance expenses per operating day added 2 per cent YoY, up from C$27,010 in 2024 to C$27,632 in 2025, they were predominantly impacted by Q4 rig preparations for January 2026 work programs, executed without offsetting revenue, which, in conjunction with higher overall activity – 2,719 operating days in 2024 to 2,839 in 2025 – yielded approximately flat adjusted operating margins YoY.
Capital spending also rose, ending 11 per cent higher YoY, because of investments in Level IV inspections, required every 1,200 operating days, which will only serve to reinforce Canadian fleet longevity.
Leadership with experience across the market lifecycle
At the helm of AKITA’s profitable operations is a leadership team that combines long-tenures with a versatile skillset from the field to the boardroom, positioning the company to respond, as opposed to react, to market dynamics. Let’s meet them now:
- Colin A. Dease, President and Chief Executive Officer, has been with the company for more than 15 years, occupying his current roles since April 2023. An experienced lawyer, he began his career at AKITA as Vice President, Corporate Secretary and Legal Counsel, ascending to Vice President, Canadian Operations from November 2019 to April 2021, President, Canadian Division from May 2021 to June 2022, and President and Chief Operating Officer from June 2022 to April 2023. Dease is a Director of the Canadian Association of Energy Contractors and holds the Governance Fellows Designation from the National Association of Corporate Directors as well as the Corporate Director Designation from the Institute of Corporate Directors.
- Darcy Reynolds, Vice President, Finance and Chief Financial Officer, has built a more than 14-year track record at AKITA, previously serving as Vice President, Finance from March 2016 to February 2017. Prior to joining the company, Reynolds worked at a Big 4 accounting firm, where he obtained his Chartered Accountant designation. He is a member of the Chartered Professional Accountants of Alberta.
- Dease and Reynolds are complemented by a board of directors, more than half of which have been with AKITA for more than a decade, whose broad and directly applicable expertise extends across the oil and gas supply chain, from upstream production to downstream processing, including specializations in the Alberta and Western Canadian markets, the Canadian regulatory landscape, as well as the ins and outs of executive leadership supporting major energy operators such as ATCO (TSX:ACO.X) and Canadian Utilities Limited (TSX:CU).
Now that we’ve established that AKITA is guided by accomplished leaders in the oil and gas industry, who have proven themselves capable of turning profitability into multi-bagger returns, the appropriate question investors should be asking is, ‘How does AKITA’s differentiated business match up against the market’s perception of its ability to create long-term shareholder value?”
AKITA’s high-conviction case for undervaluation
An initial indication of AKITA’s undervaluation is a normal course issuer bid announced in July 2025, stemming from leadership’s “desire to align the intrinsic value of the corporation’s business with current trading prices for the shares.”
The move, marking the beginning of AKITA’s shift from an exclusive focus on debt repayment to a more balanced approach to capital allocation, including the enhancement of shareholder value, is the culmination of the company’s past four years of uninterrupted profitability, but also reflects leadership’s belief in the resilience of its target markets, with Dease noting that,
“While the world continues to experience geopolitical uncertainty, we are optimistic about the North American recovery in the oil and gas industry. We believe that 2026 will be a strong year for AKITA, and our team is focused on executing our strategy to deliver that success.”
Leadership’s optimism mirrors the US Energy Information Administration, which sees domestic oil and gas production growing into 2027, and the Canada Energy Regulator, whose forecast sees production rising into the next decade, with initial steps towards a peaceful resolution between Iran and the US suggesting that a rebound in industry sentiment may show up in the data sooner than later.
This dynamic sets the stage for AKITA to continue generating profits, as it has since 2022, by strategically putting its rigs to work in line with market dynamics, whether that’s under soaring oil prices as the world returned to post-COVID normality in 2022, or as prices gradually declined with inflation into 2025, only to shoot higher once more as conflict in the Middle East makes it more expensive for the world to do business.
AKITA pairs its ability to make money during good times and tough times alike with a price-to-earnings ratio of just over 10, representing a significant discount to the average of 23.3x for the Canadian market and 22.9x for the US market, according to Simply Wall Street, granting readers a deep-value opportunity to invest today as leadership vies to close this gap through its proven commitment to operational excellence.
With the oil and gas stock up by more than 90 per cent year-to-date, it’s clear that an increasing number of investors are catching wind of this dislocation between market perception and intrinsic value, viewing ongoing geopolitical tensions as but another opportunity for the company’s consummate capital allocators to shine.
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